SUPPLYCHAINTRIBE.COM January - February 2019 Volume 3 Issue 1 For private circulation only
INSIDE The inspiring supply chain transformation journey of Godrej Nature’s Basket Supply Chain, a gamechanger at Adani Wilmar Nuances of the new age smart supply chains, revealed by Industry veterans
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Tall Order With logistics receiving the much-needed Infrastructure Status, is the road to progress being paved fast enough? Our Cover Story unveils‌
PUBLISHER’S NOTE
Looking forward to 2019 Dear Readers, There have been many hits in 2018 because of which I am really looking forward to 2019. The logistics sector has picked up pace in 2018 and there have been a few big ticket investments. According to a recent report by CARE Ratings, the country’s largely fragmented logistics sector is likely to be at $215 billion by 2020-21 from approximate size of $160 billion in 2016-17 on back of development of logistics-related infrastructure such as dedicated freight corridors, logistics parks, free trade warehousing zones and container freight stations among other initiatives like GST, investments in road infrastructure, development of inland waterways and coastal shipping. Given that logistics sector can only be strengthened by building infrastructure, our Cover Story looks at where we are and where we need to be. FMCG sector has been a big beneficiary of GST. IBEF reports that this sector is further expected to grow at a Compound Annual Growth Rate (CAGR) of 27.86 per cent to reach US$ 103.7 billion by 2020. Channel mix has gone through an evolution with the emergence of e-commerce, modern trade and reduction in criticality of wholesale. All large players are working towards a direct distribution strategy which would also require supply chain transformation. While the logistics sector saw major investments, however, there seems to be a consolidation happening. Tech start-ups who don’t have a differentiator may find it difficult to raise further funding. Players who bring in true innovations which effectively plug need gaps, address pain points and bring in far greater efficiencies are going to be the next disruptors. 2019 is going to be interesting. Let’s make things happen!
Charulata Bansal Publisher Charulata.bansal@celerityin.com www.supplychaintribe.com
Published by Charulata Bansal on behalf of Celerity India Marketing Services Edited by: Prerna Lodaya • e-mail: prerna.lodaya@celerityin.com Designed by: Lakshminarayanan G • e-mail: lakshdesign@gmail.com Printed by: Xposures, A 210, Byculla Service Industrial Estate, D K Cross Road, Byculla, Mumbai- 400027. Logistics Partner: Blue Dart Express Limited
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CONTENTS
January - February 2019 Volume 3 Issue 1
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COVER STORY The Mighty Beast Logistics infrastructure, covering the road, rail, waterways and air network of a country, is the backbone on which a nation marches ahead. We have all realised its importance as fuel for economic development. Our Cover Story unveils the crucial aspects that will enhance the logistics infrastructure efficiency for the country to prosper and grow…
27 Infusing Aroma Arjun Ranga, MD, Cycle Pure Agarbathies, believes in offering the best to its customers and in the finest quality possible.
6 SPECIAL STORY A Journey to Delight Arshad Saiyed, AVP and Head – Supply Chain, Godrej Nature’s Basket, takes us on the transformative supply chain journey of Godrej Nature’s Basket.
11 FOCUS IoT in the Yard Pradeep Kumar Chaudhary, Transportation Practice, Tata Consultancy Services, talks about an IoT enabled ecosystem using a fusion of sensors, analytics and cognitive technologies to streamline yard operations.
INTERVIEWS
22 Managing the Crests and Troughs For Praveen Jain, General Manager – Supply Chain, Adani Wilmar Ltd., supply chain is not just about pushing sales orders but the term itself caters to various departments, which could lead any genre of business to its apex.
25 PERSPECTIVE Smartly Connected with Technology Supply Chains, ably backed by smart technologies of today, are the way forward to organizational growth, as concurred by the Industry leaders.
30 OPINION It’s a Taxing Business Legal Advocate Rajesh Kumar opines that logistics has always faced step-motherly treatment from tax authorities. The cost of providing logistics services is high because of numerous taxes imposed by the Governments, especially related to Fuel.
32 EVENT RECAP Celebrating Excellence Invaluable learnings, in-depth case-studies and many Awards- these were some of the highlights at the CII Scale Awards.
34 RECAP News & views trending globally
Editor: Prerna Lodaya DISCLAIMER: This magazine is being published on the condition and understanding that the information, comments and views it contains are merely for guidance and reference and must not be taken as having the authority of, or being binding in any way on, the author, editors, publishers who do not take any responsibility whatsoever for any loss, damage or distress to any person on account of any action taken or not taken on the basis of this publication. Despite all the care taken, errors or omissions may have crept inadvertently into this publication. The publisher shall be obliged if any such error or omission is brought to her notice for possible correction in the next edition. The views expressed here are solely those of the author in his private/professional capacity and do not in any way represent the views of the publisher. All trademarks, products, pictures, copyrights, registered marks, patents, logos, holograms and names belong to the respective owners. The publication will entertain no claims on the above. No part of this publication can be reproduced or transmitted in any form or by any means, without prior permission of the publisher. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Mumbai only.
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SPECIAL STORY
SPECIAL STORY
A Journey to Delight Two years ago, Godrej Nature’s Basket (GNB) set on a transformation journey – REFRESH 2020. Aptly playing its part, the newly established supply chain function at GNB not only brought considerable efficiency with deep impact on in-stock level, on-time delivery, inventory planning, returns management but also enhanced customers’ delight at each point. Arshad Saiyed, AVP and Head – Supply Chain, Godrej Nature’s Basket, shares their supply chain journey…
Project replenishment Satisfied and delighted customers are key to any business success. Supply chain plays a key role in assisting store teams to fulfill customer needs and delight them. Rightly functioning supply chain with strong customer centricity brings competitive differentiation to fresh and ambient food retail business. Nature’s Basket has become wellknown for offering international product ranges, but there were opportunities for improvement on customer
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experience from the standpoint of consistency in availability. This at times led to customer dissonance and some frustration among store teams. When we deep dived, we observed this happened due to manual processes which were inconsistent, time consuming from indenting and replenishment and had weaker controls. It as well led to higher wastages, adversely impacting operational efficiency and profitability. Over the last 20 months, our supply chain team led the defining & implementation of various process frameworks, replenishment models for fresh and ambient categories in partnership with category and operations colleagues and developing sustainable supplier relationships. This achieved shared business success on three clear focus areas: ◆ Strong customer centricity by achieving consistently high availability ◆ Service organization mindset to support stores, ensuring support from vendors ◆ Enhance efficiency in supply chain through better optimizations and process standardizations. Significant improvement was attained in stock availability of fresh
and ambient categories which positively impacted customer NPS score on availability to 65 from 25. HF (High frequency) customers as well improved to 55% from earlier 44%. The goal of Godrej Natures’ Basket supply chain team is to ensure products are available at the convenience of the shopper in the most efficient manner. This want is accentuated due to large number of SKUs, seasonal / market variations, constant changing customer needs, ever evolving supplier base and long lead times. The processes are designed and driven with paramount focus on the need of internal and external customer.
This journey to success was not easy Well, the major pain point of the stores was inconsistent availability of products, leading to customer dissonance. Supply chain function addressed it by creating a roadmap with time-bound milestones in alignment with other business functions factoring business priorities. The team started approaching the delivery on this metric in a phased manner - one category after another. It all started with fresh categories and progressed into ambient categories over a period of 4-5 months. The results
were inspiring and strong reflection of aligned efforts: ◆ Built replenishment model for fresh categories to help stores order accurately and ensure consistent abundance of produce on shelves. ◆ Fresh category fill rates improved to 90% from earlier levels of 6570% and YoY sales growth in these categories were in the range of 30%+ (Bakery–39%, F&V-46%, Meats–17%) ◆ Achieved substantial improvement in stock availability for ambient products. Stock availability (> 3days) has reached 88 % from earlier 55%. ◆ DC to store fill rates (Service rate) improved to 88 % from earlier 6570% levels ◆ Worked with tech/IT team to drive process through system and add scalability. Built strong partnership with the category, operations and IT team to institutionalize processes, which addressed current gaps and set the foundation for future scale. Master data management processes to improve master data quality with defined SOP on article-vendor listing and necessary guidelines Assortment Rationalization: Basis customer and internal feedback to have consistent availability of merchandise basis the available shelf spaces and GMROF, store level finite SKU count was defined. Ambient assortment being optimized from 9000 SKUs to current 3500 SKUs. This led to better stock management and consistent availability. Simultaneously, assortment lock concept (Item budget) has been introduced at category level to have effective control over inventory and consistent shelf space optimization. Cross-functional New Store Opening: Plans for the same were prepared with function wise ownership, timelines, mapping overlaps and interdependencies. It helped in previsibility of activities across function and timely stock connectivity at the store. Successfully opened all new stores. We have opened in all 15 new sites over last year.
The task force The newly formed team at Nature’s
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Until & unless you have a proper supply chain function in place along with efficient sourcing team supported by strong front end, you will not be able to achieve the strategy.
Basket formulated and worked towards the supply chain strategy supported by required organogram with a 3-year road map with milestones to proactively contribute towards transformation journey of refresh 2020 Vision. There have been two focus aspects: Sustainability: The supply chain team brought critical systemic changes in SAP in close collaboration with the IT team to make the replenishment processes sustainable viz., article-vendor master updation in SAP, setting up automated PO expiry control basis supplier lead times to push vendors for on-time delivery, scanning based goods receiving in DC to check EAN mismatches at source, DC-store replenishment in SAP to have system visibility of stock replenishment and picking efficiency at DC. The team is working to build further system controls and integrate the process into SAP to manage future scale with profitability. Scalability: The team worked to envision a future-ready supply chain by bringing about structural changes in the supply chain to efficiently manage the scale of increasing the footprint of stores through key centralization project, delivered through smart warehousing. This entailed moving more merchandise through the warehouse, achieving the benefit of consolidation, economies of
scale at the back-end, and providing better operational efficiency to store operations with optimized inventory and additional margin or the business leading to COGS improvement.
The transformation journey The transformation journey was challenging as it entailed a shift of value proposition change from a being a destination to a neighborhood store and from premium food to daily delight store. To translate that strategy across the entire organization and getting it executed required a lot of change management. We have been able to percolate that change right from top to down as well built right capabilities in terms of people & processes in the organization. Supply chain function was actually originated from that strategy. It was originated as one of the strategic pillars in this transformative journey. Our transformation journey to redefine India’s freshest and finest food experience rests on four key pillars: ◆ Excel in Sourcing & serving the freshest and the finest. ◆ Stores come first, always & every time ◆ Relentless in achieving profitable growth ◆ Creating a lasting experience for all customers, employees, suppliers and communities We began our journey at Nature’s
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We achieved an inflexion point in our transformation journey with the setting up of a Smart Warehouse which not only debottlenecked our backend but also significantly enhanced our warehousing and fulfillment capabilities.
Basket in January 2017 with myself being a single individual to an entire function starting from defining strategy, roadmap with milestones, organizational structure, integration of existing talent, hiring specialized talent, developing supplier relationships and setting up processes. We were clear that we wanted to build a company, which was extremely strong with processes. This is a very execution focused business, and to have high class execution, a company needs to be built on processes and drive those processes through the right set of people and technology. We did overall assortment rationalization because in an average 5k-6k SFT neighborhood store, you will not be able to keep more than 5000 SKUs factoring supplier fill rates but our assortment used to be in the range of 12,000. There were two drawbacks to manage such a huge SKU. First of all, we were not able to deliver a consistent experience to our customers because one day we would have one product and another day a new product came on the shelf. In such cases, consistent SKU availability goes for a toss and the second is your inventory holding. Earlier our damage & expiry used to be in the range of 6-8%, which has now come down to 2.5%. This is even when our fresh contribution to overall business is more than 50%.
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Huge credit goes to our category and sourcing colleagues in improving the sourcing for Nature’s Basket. Our sourcing teams did great work in identifying the right origin, right partners and consolidators who perfectly understand our requirements and quality parameters. We are trying to go deeper into the back-end and upstream to avoid undue consolidators in between. For F&V, around 35%-40% of sourcing happens from farmers based in Manchar and Nashik farms. We have tied up with farmers so that the benefits percolate right to the bottom of the pyramid. Two months back, the company hosted farmers’ conference at a place where they grow. It helps us empower them, educate them of our requirements and in turn our customers get what they want and farmers get much more deserving prices for their goods. Network clustering within each region: Once the cluster is finalized with a set of stores, the SKU count per cluster is finalized – only that much count is allowed into the store because it has to offer effective revenue to the company against the space utilized. When we keep these counts constant and follow one-in one-out it helps us maintain perfect balance between key sellers, new product introductions and continually improving customer experience. That
was a big process change that we had to bring in along with maintaining consistent availability. We also brought in a lot of change in terms of SAP and Master Data Management system because the idea is to not just list the product but to ensure that once you’ve listed that product, it is consistently available in the market. We have to be very accurate in demand-supply planning to ensure that ordering accuracy is better. We are also working on continually improving engagement with our suppliers so that our fill rates are better. We have started tracking the top suppliers and are continuously discussing with them to enhance ontime deliveries. With the rationalized assortment, right ordering, and better supplier engagement, our fill rates have enhanced significantly. Earlier our fill rates used to be 45—48%, now it has gone up to 75%+. By ordering efficiently, the availability of the stock on the shelf has improved hugely. When we started, we had 54—58% availability of stocks, today we have been able to take that figure to 88%. At any store, the stock has to be in a minimum quantity, which is sufficient for three days of sale. That’s a significant business shift. Adoption of centralization strategy and augmenting it by a SMART warehouse: We are in growth phase, adding 2-3 stores every month. Nature’s basket is already a network of approx. 40 stores with further inorganic addition of 15 stores in the Goa market through a JV. Currently we are focused on organic growth in 3 geographies – Mumbai, Pune and Bangalore.
which pro-actively support the future scale in an efficient manner. For my suppliers to reach out to each store and for us to manage ordering of each store, requires a lot of efforts. I believe it’s not a scalable model. We are trying to build increased centralization or indirect flow share up to 70% levels. This will be highly beneficial to stores and enable them in efficient front end operations. Stock levels at stores will reduce due to reduced lead times, no MOQ condition and aggregation of inventory at higher node. Store staff and their time used in goods receiving will reduce significantly because now stores don’t have to manage 40-45 deliveries from suppliers a day. With higher centralization share stores will have under 10 deliveries a day including a consolidated delivery.
A Smart warehouse in Bhiwandi We achieved an inflexion point in our transformation journey with the setting up of a Smart Warehouse which not only de-bottlenecked our backend but also significantly enhanced our warehousing and fulfillment capabilities. It’s equipped with state-of-the-art infrastructure - flexible and scalable as well deep integration of technological capabilities in each step of warehouse operations, including an integrated and customized WMS capability with differentiation offered on two aspects (a.) automated batch management based on FIFO (first in first out) and (b.) Paperless operations. We had set an ambition to build a scalable supply chain by establishing a smart warehouse- it entailed moving to a new premise – complaint and scalable for space, layout, quality and infra standpoint as well involved on-boarding of a professional 3PL with the right logistics and tech capabilities and having focus on productivity and a service mindset.
Around Dec 2017, we had set an ambition to achieve the milestone and transition journey from blueprint to results was achieved in record time of 7 months. We created an exhaustive project plan covering all possible aspects across functions and stakeholders with tentative timelines and kept a hawk eye focus across key milestones and their delivery. This was a great case of end-to-end planning, with deep focus, anticipation and execution abilities and accommodating any deviations well in time to avoid any impact on final timeline. The entire journey had three key milestones a. RFQ, evaluation, CSQ and LOI and site finalization b. Defining IT landscape (WMS customization, WMS- SAP interface detailing followed by WMS-SAP integration) – this was key as the entire benefit on technological investment were to come from the quality of data handshake and data movement being close to real time. c. Greenfield set-up (site getting ready, Capex procurement & installation and finally statutory compliances. All of this required huge efforts and consistent attention from the team directly working on the project, cross functional collaboration and coordination with external parties. The overall experience was a demanding but quite a rewarding experience when we were able to see the benefit it started delivering in terms of consistent service levels to stores - 96.5%, On-time GRN – 94.2% GRN completed same day and returns reduced to 0.9% from earlier 4.1%. The real time visibility and prompt action helped us improve the quality and productivity of entire operations with damage & expiry at WH coming under 0.6 % from 4% easier.
Demand & supply management For demand management, we consider quite a few historical parameters and certain immediate future factors. We do demand planning basis past 90 days data of sale. We also factor previous year sales during the forecasted period and then we do weightage analysis and create a baseline with exponential smoothing. Once we have a baseline ready, we work based on our annual operating plan and check on variances and do consensus planning with stakeholders and finally arrive at demand plan. We intend to start an automated way of sharing a 13-week rolling plan with our key suppliers so that they are also aware in terms of what they need to keep. That’s the way complete demand planning works. In terms of supply planning, since we have two modes – direct store delivery (DSD) and indirect flow share (DC). We have different replenishment logic for both. For DSD, we can’t keep inventory holding more than 7-15 days depending on SKU characteristics as stores don’t have much space. But at DC, we keep an inventory of 25-30 days depending on the SKU if it’s a flow through or put-away. We are investing heavily into implementing new age technology solutions such as SAP driven auto replenishment. Going ahead, the entire supply-demand planning will be managed by SAP. We expect this to be the next game changer for this year.
Omni opportunity Omni-channel adds a variety to a company’s offline or physical retail stores. At physical stores, we just need to ensure that the products are available on the shelf but the moment you go online, you are actually offering an assortment, which is much wider than what you can keep on the shelf as
Momentum as we scale up: Once, as a management team, we aligned on clustered centralization as strategy to grow, we were clearly committed to invest in our backend capabilities of warehousing and distribution to not only manage current volumes better but more importantly to offer a back-end
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Reverse logistics remains a big part of online business and specially in the fresh supply chain because the moment you have multiple handlings, the perishability of the product goes significantly higher and if the product is being handed beyond three or four times, the product usage gets limited. So, we try to ensure minimum touches. the store space is always going to be limited and the product portfolio will keep on growing from time to time. The challenge is to manage assortment along with the customer service level that you have promised. Currently around 15% of Nature’s Basket business gets generated from its online channel, which is a good contribution. We have identified certain specific catchments or specific stores to ensure home delivery of online orders. Going forward, we have a plan in place to develop certain dark stores and if the volumes increase further, we might open a consolidation center as well. We have around 5 delivery slots throughout the day to service our customers. The key lies in executing better fulfillment, last mile delivery seamlessly in terms of route planning, real-time visibility and customer experience.
Reducing reverse logistics instance We have invested in online processes and in back-end technology to ensure that the product reaches the customer in optimum condition of quality and temperature. When we started, we took a few months to set up the right processes. You need to appreciate the fact that we are not retailing a smartphone with consistent features rather we are serving the demand which is perishable in nature and same SKU has different sizes and complexities are high. Parameters such as right product sourcing, post-harvest handling, storage and handling, managing supplier relationship, sorting and grading before dispatch to stores, maintaining quality norms at each step of supply chain and finally how the order is getting picked and dispatched from the store till it reaches the customer, if you are
able to maintain quality guidelines across then you are able to deliver that quality to customers. It calls for a lot of investment in terms of processes, and as you scale up, you have to ensure that processes start to get integrated with technology but very critical is getting the right set of people. In a nutshell, if processes, technology and right people are balanced well, then automatically you are able to deliver a consistent experience to your customers and that’s what precisely we have done in the Nature’s Basket journey. Reverse logistics remains a big part of online business and specially in the fresh supply chain because the moment you have multiple handlings, perishability of the product goes significantly higher and if the product is being handed beyond three or four times, the product usage gets limited. So, we try to ensure minimum touches. We have returns of roughly 6% in online and home delivery and we are aiming to bring it down to 2.5 – 3%. The challenges are definitely there because the higher the number of returns, the higher is probability of damage and expiry.
3PLs – a critical link The moment you have any considerable warehousing and distribution operations for a retail business then the right 3PL plays a critical and differentiating role. Smart warehouse that Nature’s Basket has set up in Mumbai is run by a professional and tech oriented 3PL. The most important parameters on which it evaluates 3PLs include: ◆ 3PLs must possess a growth as well as service mindset and serve the company that has invested in their logistics capabilities by keeping the service levels top-notch.
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◆ They need to have strong processes in place with technology at their core. ◆ The team must take customer feedback very seriously and continually strive to innovate further. ◆ They need to be thoroughly professional in their approach. We have two warehouses – Mumbai & Bangalore. Both are operated by different 3PLs. Mumbai is a bigger operation with different requirements vis-à-vis Bangalore. 3PL engagements are long-term starting with 3-year contracts. We are quite optimistic from the way entire 3PL industry is shaping up given the shift in the nature of fulfillment and distribution driven by customer expectations & order characteristics and wave of new technology innovation like collaborative robotics, augmented reality, autonomous vehicles, sensor technology and IoT.
‘GNB Refresh 2020’ Godrej Nature’s Basket has embarked on a journey of strategic transformation titled ‘GNB Refresh 2020’. The business strategy outlines a clear roadmap for the business to become India’s freshest and finest premium neighborhood store and achieve its target of 3x growth by FY20. GNB’s transformation journey entails consolidation and sustainable profitable growth that will materialize over the next 3 to 5 years. The aim is to have a robust and thoughtful omnichannel expansion in the medium term. We aim to provide a brighter customer experience with an assortment of finest local and international foods and highest level of service; and to continue to set benchmarks in gourmet food retailing. Arshad Saiyed has 14 years of strong track record of building supply chains and steering critical initiatives at leading organizations across retail, wholesale, FMCG and manufacturing. He is an alumnus of SP Jain School of Management and a mechanical engineering graduate. Arshad has led and managed diverse roles within supply chain across these organizations ranging from supply chain planning, setting up demand and supply planning vertical, heading logistics operations including imports, 3PL negotiations and performance management.
FOCUS
IoT in the Yard For many manufacturers, retail distributors, ports and logistics service providers (LSPs), optimizing operations in the warehouse / sorting centres and on the road consume a very large portion of their digitization efforts. The Yard often gets overlooked, though there exist significant opportunities for improving productivity and reducing costs. Through this article, Pradeep Kumar Chaudhary, Transportation Practice, Tata Consultancy Services, looks at various ways the Internet of Things (IoT) can be harnessed for ‘closing the gap’ in the yard and taking the leap for digital efficiencies.
Y
ARD Operations are applicable for various types of logistics operations, including manufacturing and retail distribution companies with large yards where trucks come in, go out and move between buildings for bringing in raw materials or moving out finished goods; material handling equipment or vehicles meant for internal movement deployed for transferring workin-progress goods from one facility to another; large LSPs with warehouses and cross-dock operations having significant traffic of inbound and outbound trucks that require tracking and control; and port terminals with facilities for import / export container storage and movements. Most yard processes however, are manually driven with a high propensity for errors. Even if a Yard Management System (YMS) is being used, the siloed enterprise systems provide limited visibility of what’s happening at an aggregate level on a real-time basis. The result is inefficiencies in the system, rising costs and low productivity.
Challenges in Yard Management • Manual paper-based processes • Error-prone operations • Limited visibility
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• • • • •
Siloed systems No predictive insights Uncontrolled costs Pressure on cycle times Requirements of rapid scaling during peak season.
Enter IoT: ‘IoT’ is no longer a buzzword but has started touching our everyday lives. Our homes, cars, watches, televisions, air conditioners are becoming smarter through connectivity to the Internet and intelligent software running in the background. Watches now inform us of an incoming call. Window blinds open or close automatically as per sunlight direction. Cars remind us of preventive maintenance based on usage. Uber is a great example of a company, which connected multiple smartphones together through a platform and a mix of devices, big data analytics and machine learning to radically change the way we travel. IoT is influencing our personal lives and how businesses operate. By 2020, Gartner estimates Internet-connected things will outnumber humans 4-to1, creating new dynamics for marketing, sales and customer service. Logistics is a critical and complex component of the supply
chain. Focusing just on yard operations within Logistics – An IoT enabled ecosystem using a fusion of sensors, analytics and cognitive technologies can bring about the sophistication and insights required into streamlining activities. At a broad level, the yard management processes for a typical LSP operation can be summarized as below.
Gate-Out
Docking Yard Movement Gate-In
Miscellaneous Activites Fuelling / Inspection / Car wash / M&R
High Level Yard processes
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FOCUS IoT can be deployed in Yard Operations to make the processes efficient and more productive. Let’s see below: Current Process
IoT reimagined process
• Manual check for appointment schedule • Manual entry of vehicle details at the gate • Manual inspection of trailer exterior • Manual seal check
• Self-service gate-in / gate-out kiosks • QR code to confirm and validate the vehicle’s presence • Cameras at gate for trailer visual inspection for damages and seal check • RFID tag affixed during gatein on the trailer for tracking movement in premises. • Dock door or parking spot location communicated to the driver via the mobile app
Business Value • Increases gate check in & check out velocity • Streamlines gate procedures • Automation eliminates chances of errors like wrong dock door or parking lot assignment, wrong capture of vehicle details etc. • Faster exception handling
On-Road
Driver
Condition Monitoring Dynamic Work assignment
Safety Infrastructure Flow Optimization Track & Trace Asset Mgt Warehouse | DC
Yard Movement & Docking Vehicle Inspection Vehicle Maintenance and Repair
• Digital Move Orders increases • Sensors at dock doors productivity of gate supervisors and parking locations to and drivers communicate open slots. • Complete real time visibility of the • Driver navigates to the dock or vehicle in the yard. Time spent by parking location using the yard yard jockeys in locating a parked map on the mobile which guides vehicle reduces considerably as him to the right location. exact location is now known • Sensor tags on the vehicle communicate with readers at the • Detention / Demurrage charges can be significantly reduced time of parking or dock latching. through optimized yard planning Any wrong move triggers an and execution alert on the drivers mobile as well as YMS Alerts get generated whenever: • a docked or parked vehicle exceeds appointment schedule
• Totally manual activity
• Telematics / Mobility and analytics for semi-automated Vehicle Inspection Reporting
• Productivity improvements of more than 50% achieved
• Scheduled maintenance approach or breakdown maintenance approach • Time consuming and less productive
• Intelligent parts ordering through predictive maintenance
• Costly vehicle downtime is prevented resulting in significant savings
Condition Monitoring Inventory
Operations Mgt
• Move Orders are manually created in the Yard Management system and the paper movement slip is given to the driver. • Driver has to locate the dock door or the parking lot. For drivers new to the location, this can be a timeconsuming process • There are no checks in place to ensure that the driver has parked in the right location • Since there is no tracking of the vehicle in the yard, there is no visibility of its location on a real time basis
More than 25% of drivers return to their home base only after eight days, as per a report from Niti Aayog.
Driving behaviour
Logistics
Gate In / Gate Out
Activity
Location Vehicle
Sort | Pick | Pack Employee work assignment
On-Premise
Track & Trace Asset Mgt Yard Operations Mgt
Condition Monitoring Safety & Compliance Parking and Dock
High Level IoT footprint in Logistics operations
Figure 2 : High Level IoT footprint in Logistics operations
• a docked or parked vehicle is about to exceed the free detention / demurrage period.
IoT is influencing our personal lives and how businesses operate. By 2020, Gartner estimates Internet-connected things will outnumber humans 4-to-1, creating new dynamics for marketing, sales and customer service. Logistics is a critical and complex component of the supply chain. 12 CELERITY January - February 2019
Synchronizing operations Figure 3: Synchronizing operations Yard-as-a-Service: Yard-as-a-Service:
parking of vehicles or driver relay points. A connectedYard Yard offer Theonyard can assets serve through as a cross docking of A connected cancan offer opportunities to capitalize existing an ecosystem opportunities to capitalize on existing location for a driver exchange event. participating companies. assets through an ecosystem of Long haul truck movements operated a) Driver Relay Point / Parking Point participating companies. by a single driver can be changed to Based on real time vehicle movements and projected availability of vacant spaces in the yard, thesame space two to three drivers operating the can be rented out on a marketplace like app to participating entities viz., other Logistics Service Providers a) Driver Relay Point / Parking Point route in turns. This helps the drivers for either temporary parking of vehicles or driver relay points. The yard can serve as a cross docking Based timeexchange vehicleevent. movements shorter and higher number locationon for real a driver Long haul truckmake movements operated by a single driverofcan be and projected vacant the same route trips and be to their changed to two toavailability three driversofoperating in turns. Thiscloser helps the drivershome; making in shorter and moreintrips be closer to theircan home; them to continue on their job since spaces theand yard, the space be in turn motivating turn motivating thembeing to continue being one of the reasons for the decline in the number of drivers available is low quality of life. rented out on a marketplace like app to on their job since one of the reasons participating entities viz., other the decline in per thea report number ofNiti drivers More than 25% of drivers return to theirLogistics home base onlyfor after eight days, as from Aayog. Service Providers for either temporary available is low quality of life. b) Visibility Visibility is by far the most important aspect of a shipment. Customers today demand granular levels of visibility – right from origin to destination. Since all vehicles in the yard are tagged with sensors, their real supplychaintribe.com time location can be communicated to concerned parties. A full vehicle can have lakhs of rupees of material worth inside and customers would desire a real time location view of their assets. Providing
b) Visibility Visibility is by far the most important aspect of a shipment. Customers today demand granular levels of visibility – right from origin to destination. Since all vehicles in the yard are tagged with sensors, their real-time location can be communicated to concerned parties. A full vehicle can have material worth lakhs of rupees inside and customers would desire a real-time location view of their assets. Providing visibility services to customers like location, expected docking time, expected departure time, exceptions et al can be a great value-add. In conclusion The Yard should be seen as an equally important piece to the transportation jigsaw. Inefficiencies exist not only on the road but also inside the four boundary walls of the facility. By leveraging the power of IoT, manufacturers, retail distributors, LSPs, terminal operators and their customers can gain insights and efficiencies through real time, data driven and connected processes that amalgamate yard operations with other enterprise operations and thus provide value to the entire ecosystem. The future belongs to customers who have gone digital and to ecosystems that are digitized. Digital is now more of a core requisite than an add-on to enterprise requirements. Pradeep Chaudhary is a Domain Consultant with TCS’ Travel, Transportation and Hospitality business unit. He has over 20 years of experience in the logistics and supply chain area. He works for the Transportation Domain Practice within the group and is responsible for creating innovative digital offerings for TCS’ clients in the logistics space.
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COVER STORY
COVER STORY
The Mighty Beast The Indian logistics sector is on a path of transformation. Logistics related Infrastructure will greatly drive efficiencies and boost economic development. It is also the fuel for manufacturing growth in India. As India gears up for the next phase of growth, logistics infrastructure will be the critical enabler. recent McKinsey report stated, “Logistics infrastructure, covering the road, rail, waterways and air network of a country, is the backbone on which the nation marches ahead.” The task to achieve the infrastructural level to achieve 7-8% of growth over the next decade is no small task. The 2.5x growth in freight traffic will increase the pressure on India’s logistics infrastructure. There is a huge scope for India to build its infrastructure, as a large part of it is yet to be built. “Infrastructure is the Blood that courses through the veins of Supply Chain Process connecting all the organs and keeping them vitalized. Just like our bodies need good and healthy blood to survive, so does the industry. India like all developing nations has multifaceted challenges hindering its growth – Infrastructure would be in the Top 3. The others would be good primary education and sanitation facilities for all,” feels Raviraj Rodrigues, Director – Supply Chain, Alstom Transport India Ltd. Aptly describing the criticality of infrastructure for the steadfast growth of the Indian economy, Milind Tailor, Director – Procurement, Asia Pacific & Supply Chain, India, Diebold Nixdorf, remarks, “India is one of the fastest
growing economies in the world and a leading consumer market. In order to sustain the growth and support the ambitious Make In India Plan, logistics sector plays a critical role. Connectivity & convenience in operations are the key for sustainable global trade growth. India’s once shoddy looking infrastructure is looking much better but it still has a long way to go to catch up with China.” The quality of infrastructure directly determines the quality of logistics from producer to consumer. It is a major determinant of logistics cost and the costs are heavily determined by the availability of the infrastructure itself. It directly influences the inventory levels and consequently the financials of transport for the products. Improving infrastructure not only lowers the costs that companies incur due to the logistics, but also carries a significant impact on the competitiveness of the country. India is currently low on rankings in infrastructure. On the World Bank Logistics Performance Index, India ranks behind countries like Chile and South Africa. It is currently at rank 44, despite the Government’s massive efforts to develop efficient logistics infrastructure. Umesh Madhyan, Associate Vice President Logistics, Hindustan Coca-Cola Beverages Pvt Ltd., highlights, “While there is an increased focus on infrastructure by the recent
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Government, there is no solution on deliveries for metro cities. The average truck running per day in developed countries is 450-600 kms and in India, it is best at 250 kms. If the truck runs with no boundaries in metros, we can complete a typical trip in 6 hours instead of 26-30. So, our requirements of managing scale business with faster turnarounds is the first one to get hampered.” Additionally, infrastructural improvement needs to occur in the warehousing sector with some FTWZs built around metros to break the bulk and cross-dock scenarios. There is huge room for implementation of laws in the transportation to complement GST and this improvement has been long awaited. Load Utilization Increase or LUI is currently the only implementation that has been successfully made and it may not prove to be enough in the long run- as it only favours the construction industry. Seconding these thoughts, Rodrigues stresses, “In the logistics sector in particular, we have numerous hurdles to cross in infrastructure to be best in class with other nations.” Some of them are: ROADS: Today, roughly 275,000 kms of National and State Highways exist, connecting cities to ports and more. Around 60% of total freight in India is carried out on roads. One of the primary challenges is the condition of roads. Roughly 50% of the roads connecting
cities to ports does not suit the logistics standard, limiting truck speeds to 40 kmph, which is half the international standard. The global benchmark of logistics cost is 9% of GDP, but India operates on 13%. A saving of USD 10 billion can be made by a reduction of 1% of logistics cost and this can come with good quality of surface network to move trucks faster. Some of the ideas include: • Improvement of truck turn-around times with dedicated connection roads between ports and highways, also dedicated exit points to be included to help trucks move faster. • Enabling the use of greener energy and improving overall efficiency by implementing the RoRo (Roll on-Roll off) models for intermodal transports to make logistics less time-consuming. WAREHOUSING SPACE: Implementation of more warehouse usage models like pay-per-use or multi-use facilities available in the country, which is an area where major leaps of improvements can be made. LEGISLATION: GST may have made things simpler, but there still exists a need to register a location for GST before starting a new business. This limits the ability to access multi-user warehouses at short notice. Sudhir Kadam, Head – Warehouse Logistics, Bombardier Transportation India Pvt Ltd., feels that on-time delivery of materials is being hampered due to inefficiencies in infrastructure. According to Shamsher Dewan, Vice President Corporate Sector Ratings, ICRA, “The key issue with the logistics infrastructure is the modal mix, which is heavily skewed towards roadways, which is significantly expensive as compared to railways and waterways. This is compounded by the fact that the roadways sector is highly fragmented with the unorganized segment having ~90% share of business, which leads to higher cost by the virtue of low efficiencies.” Prahlad Tanwar, Executive Director – Transport & Logistics, KPMG India, agrees “Significant share of goods in India is moved via road, and over the years this has created a heavy dependence on road infrastructure of India. It costs INR 2.5/tonne per km to transport goods by road, compared with INR 1.06/tonne per km by water and INR 1.36/tonne
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per km by railways, making road the most expensive, polluting and unsafe mode for moving goods. However with projects like dedicated freight corridor (DFC) across the eastern and western corridor, waterway projects like Sagarmala, Bharatmala and Inland waterways are expected to bring some structural changes in the way in which goods are handled in India.” The high cost of logistics is primarily due to these two reasons- mode of transportation and hidden costs. Roads are the least effective mode of transportation and using road as the primary mode of transportation leads to inefficiencies. The logistics industry in India is highly skewed towards road transport, boosting costs, as compared to rail/water transportation in developed countries. A balance needs to be
established in modal transport networks to optimize logistics costs. Tailor highlights some of the most challenging issues being faced by the logistics industry: HIGH INVENTORIES: Firms across the world maintain high levels of inventories to account for contingencies, which proves expensive because it ties up the overall capital which carries a high cost. SALES LOSS: Loss in sales makes a huge impact on the costs that firms have to incur, as they have to carry higher as well as suffer due to the dip in sales due to transportation interruptions. TRANSPORTATION COST: In the Indian logistics sector, road has become the prominent mode of transport despite
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COVER STORY
COVER STORY
rail being well-organized and more efficient. The reason for this may be that rail networks are saturated and the transit times are uncertain, along with rail being inflexible in handling products of different types.
Working towards higher efficiency in logistics infrastructure Madhyan shares, “In an economy growing at this rate with opportunities of GST just envisioned to harness, it is imperative to think about a holistic strategy. GST, to me, is just the beginning of the change and there is a lot to be done to leverage it.” Some critical components are: A TRANSPORT PLAN TO COMPLEMENT IT: GST alone cannot grant enough flexibility for today’s logisticians. Road infrastructure needs to be upgraded as well to facilitate movement in an urban city. CHANGING TRANSPORT LAWS: There are laws that exist in the logistics sector that prove prohibitive to efficiency and flexibility. For instance, a Karnataka registered truck is prohibited from picking up and distributing orders inside the state of Telangana. A STRONG WAREHOUSING PLAN: The implementation of FTWZs outside metros could be a great plan if the complications around serving metros continue.
Umesh Madhyan, Associate Vice President Logistics, Hindustan Coca-Cola Beverages Pvt. Ltd.
Sudhir Kadam, Head – Warehouse Logistics, Bombardier Transportation India Pvt. Ltd.
SKILL DEVELOPMENT: A strong emphasis needs to be paid to develop certain skill sets that help companies keep up with rapid technological advancements. AVAILABILITY OF DRIVERS: A lack of drivers has the potential to undo all the efforts being made to advance the logistics sector, as they are the most important element of the entire ecosystem. The Government aims to establish as many as 35 MMLPs in the coming years. The key in this implementation is to have them well connected with the various modes of transport. As a country, it is critical to think in the direction of building such vital infrastructure, since it is a requirement for a better tomorrow in the industry. Talking about the crucial role of 3PLs in the entire scene, Tailor shares, “Indian logistics industry has been
3PL if used effectively will surely prove to be catalysts in harnessing efficient logistics. Unfortunately, as of now, industries look at 3PLs as a low-cost service provider and focus on manpower cost rather than the logistics benefit. Apart from the 3PLs, infrastructure manufacturers are required to come up with more automated and cost effective solutions.
unorganized and fragmented for a long time. Interestingly, it is a business, which is under massive reorganization to serve the ever-increasing need of the modern businesses. Also, being touted as the country’s ‘sunshine industry’, the Indian logistics sector is readying itself to move from its present unorganized, fragmented business model to an organized, regulated structure. This clearly indicates the government’s vision to monetize the infrastructure sector. The GoI is playing a proactive role in the development of the sector, 3PLs would give the required further impetus by investing in smaller & service focused infrastructure.” WAREHOUSING INFRASTRUCTURE: The warehousing industry in India is highly fragmented. Roughly 90% of the warehousing sector is controlled by unorganized sector. Most warehouses have an area of less than 10,000 sq.
3PLs will have to live up to the expectations of the entire industry. As of now, they are far away from making an economical proposition for FMCGs as against the traditional CFAs. 3PLs should come up with multi-user facilities and make the entire proposition more economical. There are pockets where 3PLs aren’t even thinking of making a difference. Location in East of India like Bihar, Jharkhand and North East have huge gaps in warehousing standards and facilities. I believe a multi-user facility of 1 Million square feet with high standards of quality and safety in Bihar would get sold out before even the civil structure going live. The huge attrition at the operational level is a big deterrent for users believing in 3PLs and taking risks.
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With the advancements in technologies like Internet of things, machine learning and AI, the industry would be attempting to find better means of asset sweating in various areas of operations. As DCs become more tech intensive, uptime of assets would play a life critical role for which a combination of hardware and software tools are being used for predictive maintenance as against the current preventive maintenance.
ASR Prasad, Head CoE (Centre Of Excellence), FSC
ft. Fragmented warehousing not only results in higher inventory holding, it also results in higher storage and handling losses due to lower level of mechanization. 3PLs can play a crucial role in developing modernized warehousing facilities with a view to bridge the gap between cost and efficiency of operations. Highlighting the significance of warehousing infrastructure, ASR Prasad, Head CoE (Centre of Excellence), FSC, says, “Warehouse Infrastructure covers a broad spectrum of physical infrastructure, automation and amenities to facilitate smooth, efficient and responsive operations in the Distribution Centre (DC). In terms of the physical warehouse infrastructure, it mainly covers areas like Flooring, Insulation, Air Turns, Lighting, Roofing etc. Proper flooring is a critical factor for seamless operations over a long period of time. FSC uses FM2 standards for all its large boxes. In case of DCs with Mobile Racking, FSC specifies FM1 standards. This coupled with Hardener being incorporated into the flooring and Densification wherever required ensures longevity of the flooring.” Various additions such as the availability of wide roads on four sides of the DC, safety during transit and security equipment ensure the safety of both, labour and materials at all times. Improved visibility through appropriate lighting also aids the efficiency and power saving. Both of these are a part of FSC’s green initiatives.
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Rajeev Mehta, Vice President Material Handling Division, Nilkamal Ltd., shares, “Considering the relatively lower labor costs in the Indian context, effective warehousing infra means optimization of storage density by usage of heights combined with semi automation for faster picking and sorting of goods, adaptation of palletized storage & movement within the warehouse. Clients have moved from on-ground Single level storage to palletized Highbay Racking Systems for multilevel storage with Narrow Aisle Retrieval Equipment, thereby optimizing storage density.” He adds, “Our FLC (Foldable Large Container) range, for example, is an intelligent, re-usable solution for transport and storage that gives 5X savings on reverse logistics. This system is engineered to be durable up to a 1000 usage cycles with its injection-molded lid and base and the sleeve made of Nilkamal’s revolutionary BubbleGUARD.” Striking a growing acceptance of sustainability being a key driver of
Rajeev Mehta, Vice President Material Handling Division, Nilkamal Ltd.
growth, Tanwar avers, “We generally see a lot of companies moving towards sustainability. More and more customers / buyers of the service are conscious of their carbon footprint and expect their service partner to take initiatives to be green complaint. Realizing the need to be carbon neutral if not negative, most logistics companies have taken initiatives to this direction, right from small steps like reusing packaging material, optimizing loads across roads, companies are investing in infrastructure that is environmentally friendly, eg., electric vehicles, installing solar panels on warehouses, higher ratio of natural lighting and ventilation, etc.”
Global trends are towards optimization of picking using Smart Glasses & faster delivery to Customer by usage of Drones wherever possible, leading to adaptation & Integration of AI & Blockchain with real-time updation of Data and information systems based on the same. In India, adaptation of semi automation of warehouse operation and real-time updation of Data has increased substantially driven by e-commerce trade. 17
COVER STORY While the government has initiated various infra projects like Sagarmala and Dedicated Freight Corridor etc., it is critical to see a speedy implementation of these projects. With the Make in India program, contribution of manufacturing sector is expected to go up and the value of goods are expected to increase, requiring superior supply chain standards. For this, the government should focus on a few simple things like standardization of regulation across the country for warehousing and transportation – standardizing ‘permissible’ load carrying capacity of various trucks, safety norms at warehouses, implementation of tech and digitization – to reduce documentation and improve efficiency. Milind Tailor, Director – Procurement, Asia Pacific & Supply Chain, India, Diebold Nixdorf LOGISTICS PARKS: The concept of Logistics Parks has gained increased traction in the recent years from both, public and private players. The development of a large number of SEZs or Special Economic Zones has also been a driving reason for the development of logistics centres for domestic markets as well as for trade purposes. Offering insights on the nuances of an efficient infrastructure, Tanwar shares, “The Government of India recently kicked off a program to develop Multi-Modal Logistics Parks or MMLPs. These parks, to be set up under the Logistics Efficiency Enhancement Program, aim to reduce logistics costs, improve freight aggregation, distribution, storage, and warehousing; and create various value-added services, including labeling, packaging, tagging, and crating.” LAST MILE DELIVERY: The growth of the e-commerce sector and omnichannel distribution has made last-mile delivery more and more relevant in the recent years. Increased package volumes and their impact on the time and space constraints are major pain points pertaining to last-mile delivery. There are several issues that may occur in the last-mile delivery processes like delayed deliveries, product damage, pilferage or product loss. 3PLs may help counter these issues with improved internal processes, positively impacting overall efficiency. “For our Express & LMD Business, we continuously assess customer data to align our routes and the hubs and spokes to minimize transit times or build cost efficiencies as per business needs from time to time. It’s
a continuous iterative process,” adds Prasad. IT CAPABILITIES – A KEY DIFFERENTIATOR: In the recent times, technology is being used as one of the major drivers to ensure a range of efficiencies like load planning, warehouse optimization and more. Many 3PLs are making significant investments in technology that allows them to make deeper analysis into shipping operations. As the amount of data increases, shippers will require better technologies to be able to make the available information relevant. Sounding affirmative on the scope and expanse of IT adoption, Tailor shares, “Technology can facilitate agility on several fronts, including demand planning, network optimization and real-time visibility throughout the supply chain. As underlying inputs are changed, the entire supply chain plan is refreshed right away, so plans are always current and exceptions are generated in real time as soon as any metric exceeds a set tolerance level. Plus, predictive analytics and scenariomodelling capabilities help enable swift what-if analysis, which is beneficial for those looking to make changes within the supply chain.”
Union Budget 2019-20 in the making Companies are viewing the 2019-20 union budget as a potential game changer for infrastructural improvement. Kadam shares that industries should be allowed to suggest developments and improvements to the Government, as the industries are directly impacted by the infrastructural improvements
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that are chalked for the coming years. More emphasis should be paid to environment-friendly budgets where solar and electric power may be used more effectively. Madhyan outlines the need of today and feels that the upcoming Budget should address these if not more: • Changes in Transport CMVR Regulation to complement GST • Workplace rights for drivers – mandatory AC cabins for current and old vehicles • Standardization in truck dimensions from 720 to 50 – every truck type to have definitive length, height and width • Warehousing inputs costs in GST could be another big benefit and boost to outsourcing & 3PLs • FTWZs closer to the metro locations. According to Prasad, “Budget 2019-20 will be the second Budget after the implementation of the Goods and Services Tax and the grant of infrastructure status by the Government of India. So, it’s quite apparent that the entire industry will be expecting many interesting policies being included during this Budget announcement. We can expect sector-specific policies to be announced and an increase in the allocation of budget for logistics infrastructure. However, we could also expect improvement in the existing infrastructure, procedures, identification of bottlenecks, gaps and introduction of technology-based interventions in the sector.” Mehta avows, “Logistics efficiency and automation have far-reaching effects on the overall growth of the nation. We hope the 2019–20 Budget incentivizes logistics efficiency with
3PLs have an opportunity to evolve from tactical service providers to collaborative partners that are taking on greater accountability and control. By developing a comprehensive suite of integrated logistics services to address the overall network and create a lean and cost-effective supply chain, they are also taking on more responsibility, providing add-on services that increase their value.
Key Issues in the road transport sector Poor Road Infrastructure >= 4-lane NH accounts for only 0.5% of India’s total road network which handle 40% of road freight Low Vehicle Quality India lags behind developed nations with respect to tonnage, power/ weight ratio and safety standard
HIGH TURNAROUND TIME
Prahlad Tanwar, Executive Director – Transport & Logistics, KPMG India
COVER STORY
Overloading Tendencies to overload hampers the speed of the truck. Average speed in developed nations is 1.5x High Idle Time >20% of a truck’s run-time is spent at check posts, Idle time also impacted by entry restriction and congestion in cities
*Source: ICRA Research
Key Issues in the railways sector Low Infrastructure Investments Lack of infrastructure has led to high congestion and high turnaround time
Low Reliability Network congestion and low priority for freight trains affect predictability
Cross Subsidization Frequent hike in freight rates to cross subsidize passenger tariffs
Multiple Handling Charges First mile and last mile transport makes rail expensive for short haul
*Source: ICRA Research
higher FSI, single window clearances for setting up of warehouses with optimal utilization of height. As we move towards automation, the government needs to invest in education and skill development of labor. On the taxation front, we would like to see lower taxes for plastic pallets vis-à-vis wooden pallets, which do more harm to the environment than good during their production.” Tanwar quips, “In addition to simplifying the process for GST, e-way bill and improvisation in various government agencies – commerce
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ministry and finance ministry, the government should focus on introducing training and skilling programs for the sector. With programs like Make in India, exponential growth in e-commerce, 3PL and transportation, we expect the country is going to see a shortage of skilled workforce across the industry. The government must come up with some very strong measures to attend to this immediate need.”
Towards positive horizons To make the logistics infrastructure a good opportunity for private players
to enter, we will need to look at the following key aspects, shares Rodrigues: • A well-defined financing model that addresses issues like ownership, pricing, approvals etc. • Strategies defined by the Government as per sectors, with timelines and backed by tax reductions if projects are completed in the stipulated timelines. • A strong review system to ensure timelines are met and imposing penalties for delay. Some of the above issues can be addressed by the private sector, barring a few, given the long gestation period for making these initiatives profitable. Towards enhancing efficiency, Prasad mentions these important pointers: • In terms of automation, FSC uses suite of technologies like WMS, TMS, VTS, Put-to-light, Cross belt sorter and Voice Picking as per need of the customer at various sites. • Verticalization leads to optimized space utilization, thereby increasing labor efficiency, asset utilization and inventory accuracy. The use of vertical space (racking/shelving) increases storage density and also reduces damages during internal movements. • CCTV cameras facilitate a foolproof system minimizing pilferages and shrinkage cost. • Proper flooring helps reduce the cost of damages to equipment (especially MHE’s wheels) and also eliminates safety issues like slipping and tripping. • Thermal insulation helps in maintaining ambient temperature for the workforce to effectively operate. • Tested and well-maintained fire safety equipment ensures prevention from huge losses that can occur due to fire hazards. Mehta adds, “Utilization of Height increases storage density, i.e., higher quantity of material storage/square meter of Warehouse, which reduces overall infrastructure cost. This combined with automation increases overall efficiency, helping in further optimization of costs. Nilkamal’s high bay racking, narrow aisle retrieval systems enhances the overall unit of material store per square meter, thereby reducing the cost.” Tanwar states, “Due to the multiple
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COVER STORY
COVER STORY The two Dedicated Freight Corridors (Western DFC and Eastern DFC) will lead to substantial addition of capacity, which will lead to faster transportation of goods over railways. This is expected to improve the modal mix and lower the overall cost of transportation.
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Shamsher Dewan, Vice President Corporate Sector Ratings, ICRA
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• • initiatives taken by the government, the sector is starting to see a structural shift in the way goods are handled.” Below are some of the trends that we are observing and believe are here to stay:
Verticalization: Higher number of industry-focussed solutions and specializations. Polarization: Improvement of the overall bargaining power of the industry through improved consolidation despite the fragmented nature of the industry. Distribution: Higher implementation of the Hub and Spoke system. Multi-modal Transportation: Increased efforts by the Government to ease pressure on road transport. A seamless integration of different modes of transportation on the horizon.
Standardization: With growing complexities in supply chain, we expect service providers moving towards standardization of infrastructure and processes. Eg. – Truck Sizes, Warehouse size and dimensions, uniformity in pallet sizes etc. Dewan asserts, “We believe that a 5% decline in road logistics’ share of total freight volumes could lead to savings of US$ 5-7 billion. Increased penetration of technology such as track & trace, telematics, route planning and route optimization will lead to a faster turnaround time.” Highlighting the crucial importance of private sector participation, Tanwar concludes, “India is witnessing sweeping changes in regulation and processes, this creates an opportunity for early movers and players that are able to think differently. All these changes are leading to an interesting environment for the industry, which at the end is beneficial to the end consumer who is going to see better service at a more compelling price.”
The EDFC is expected to have multiple social and environmental benefits
Others 11%
Movement of coal to power plant will shift to EDFC - leading to fewer power cuts and black outs and benefiting all major industries in the region.
Mineral Oil 5% Fertilizers 6%
Coal 44%
Food Grains 15%
EDFC will lower transport time for perishable food products and reduce the transport cost for food grains procured in UP, Punjab and Haryana.
Cement 8%
Pig Iron Steel 5%
Source: DFCCIL, World Bank, ICRA research
Impact of Western DFC Source: ICRA research
Katputli Ultratech
Sikar - Binani Ambala
Ras, Beavar Shree Cem. Gatan - JK Rabriyawas Ambuja
Rewari
Gurgaon Manesar
Bawal
Dharuhera
Haryana - Auto Hub Auto OEMs in this belt could use railways to transport vehicles and reduce transport cost
Sirohi - Binani & JK Lakshmi
Mehsana
Adityapuram Ultratech
Khushkhera Shree Cem
Mundra Port
Ahmedabad Vadodara
Pipavav Port
Mangrol - JK
Sanand - TML, Ford
Mehsana
Hansalpur MSIL
Halel - HMCL
Surat Valsad
Chanderia - Birla Nimbahera -JK Source: ICRA research
Rajasthan - Cement Cluster
Auto Hub
Vasai (MH)
Gujarat - EXIM containers
Rajasthan accounts for 80% of cement production in North India, but only 10% moves via railways DFC junction
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Palanpur
Rewari
Phulera Ajmer Lakheri - ACC Marwar
Palanpur
across different industry verticals leveraging various divisions of the TCI Group – we own and operate 6 Ships, 3 each on West and East Coast; we operate trains for many items and also have a JV with CONCOR for end-to-end multimodal solutions and we buy space on Airlines for critical logistics.
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Impact of Eastern DFC Containers 5%
“We firmly believe that Infrastructure-Process-People are indispensable for quality output, for which innovations in infrastructure is needed to bring in a paradigm shift,” asserts Jasjit Sethi, CEO, TCI Supply Chain Solutions.
Mundra, Pipavav, JNPT accounts for 65% containers handled. Container movement to/from these ports to Shift to WDFC. Cement Hub
Port
What are the key things to take into account when you are mapping routes and network to connect India? Network Design is a critical factor for a robust, agile, cost-effective and efficient supply chain. We have a patented “TCI SCS 5 Forces Model “ that encompasses crucial factors like taxation elements, logistics network, Closeness to customer base, distance from supplier base and the overall supply chain cost. Social structure in the location is also taken into consideration as it affects the workforce availability and gives an idea of any local concerns that might impact operations in the future. Client’s sensitivity plays a pivotal role in any decisions. For e.g. FMCG clients prefer near to consumption Centre placements to reduce the time to market and Retail inventory. Having said that, as a supply chain practitioner, our preference is for standardization while allowing for flexibility for a dynamic supply chain network. By when do you think 3PLs would truly be able to provide multi-modal services and how would that happen? A 3PL or LLP (Lead Logistics Provider) like TCI is mode agnostic and focusses on cost, time and stability of a network. Hence, we embrace multi-modal transport supplychaintribe.com
How have your clients’ demands changed in the last 2 years with respect to 3PL services and how are you fulfilling those? What are the need gaps still to be plugged? The key change in the last couple of years has been the advent of e-commerce, demonetization, implementation of GST and E-Way bill. This has changed the pace of logistics in India and brought about much higher digitalization for TCI as a company. We have been on the cloud since 2007, now the ERP is integrated with Mobile Apps and telematics for a faster response time. We operate FCs in double digits at global standards. Demonetization actually catalyzed our efforts for reducing cash in the system and synergized our way of working. With GST, we have helped our clients in retail and consumer products redesign and stabilize network in all geographies, saving inventory while retaining time to market. Our direct linkage with GSPs (GST Suvidha Providers) across the country ensured that we are ahead in E-Way bill implementation and control from day zero. What innovations have you implemented with respect to infrastructure? At TCI, we firmly believe that Infrastructure-Process-People are indispensable for quality
output for which innovations in infrastructure is needed to bring in a paradigm shift – be it in digitalization or technology or physical brick & mortar. We have done innovations in rolling stock for optimization and new solutions within the framework of the CMVR Rules, also winning patents on the way. Similarly, in warehousing, our automation levels have been increasing with every project for higher productivity and control. We have perhaps the most automated showcases in this field, including robots. In Technology and Digital, we have IOT solutions, which is linked with Telematics. What are the key requirements for effective warehouse infrastructure? Warehouse infrastructure revolves around the product and purpose of the warehouse. Around that revolves the building, the storage systems (Long Span Racks, HDR, VNA, AS/RS) and Handling systems (Reach Stacker, BoPT, Conveyors, etc.) and the WMS (Online/offline). However, what are definitely basics are a temperature controlled building with fire safety by sprinklers and dock levelers for enabling MHE in Loading/ Unloading, CCTV systems and the entire premises on a Facility Management System (FMS). What would you like to see in Budget 2019-20 as far as logistics infra is concerned? Broadly speaking, adequate budget allocations should be made to create state-wise warehousing zones, install FASTag facilities in remaining national and state highways, incentivize higher tonnage trucks as well as encourage movement of chemicals through ISO tanktainers.
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INTERVIEW
INTERVIEW
Managing the
Crests & Troughs “For any business, supply chain is associated as the backbone of the company especially in the FMCG industry where the crest and trough could be so pitched that the single decision regarding the same could change the view & version of the scenario. People still need to understand that SCM does not restrict itself in pushing sales for any company. The term itself caters to various departments, which could lead any genre of business to its apex,” highlights Praveen Jain, General Manager – Supply Chain, Adani Wilmar Ltd. How is the FMCG industry performing, particularly the segment you are operating in? Growing population, economic growth and rising disposable income will drive India’s edible oils consumption growth, which is expected to grow by 8% annually to exceed 34 million tons by 2030. Keeping this in mind, the demand for edible oils is increasing every single day in the global market. India’s fastest growing edible oil sector has been growing at the CAGR of 9%. Adani Wilmar Limited (AWL) is striving to catch up with this pace. Almost 19 years ago, Adani Wilmar responded to the call of the lucrative and unexplored business of the edible oil sector. It has now recorded a total turnover of `29,000 crore divided between two main business areas – edible oils and foods. The company is now a leading super power of quality edible oil and food products to the markets of India and the Middle East. We have the largest range of edible oils spanning across the categories of Soya, Sun, Mustard, Rice bran, Groundnut, Cottonseed and have extended its basket of offering with the introduction of the revolutionary oil – Vivo, India’s first oil for Diabetes care. The other business arm deals with Basmati Rice, Pulses, Soya Chunks, Besan and Fortune Chakki Fresh Atta. The product portfolio of Adani Wilmar spans under various brands such as – Fortune, King’s, Bullet, Raag, Avsar,
Pilaf, Jubilee, Fryola, Alpha and Aadhaar. Adani Wilmar Limited also caters to institutional demand through its industry essential range, which includes bulk packs of consumer essentials as well as Lauric & Bakery fats, Castor Oil derivatives, Oleo chemicals and Soya value added products.
What are the peculiarities that you need to maintain while handling edible oils and corresponding products? Well the specificities are wide and many. Some of them include: • Price variation of crude oil commodity • Depot Inventory – right product & quantity • Mapping of trucks through manufacturing locations (Depot vs Direct Party) • Transit Time & Loss • Multimodal transportation from manufacturing locations in order to optimize freight • Vendor management
Kindly explain the entire value chain. The movement of raw material (crude) of different oils happens through vessels to different manufacturing and processing locations in India. The movement is catered at portbased plant of AWL, which refines and dispatches the product to demand points. Demand forecasting takes place
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at our head office, thereby allocating the SKU wise city wise demand through supply planer for execution from various plants and job works. A logistician places the vehicle by negotiating freight at dispatch point, thereby optimizing the primary freight. The logistician also tries to cater to the multimodal option at the dispatch point to optimize the vehicles dispatch, arrival of which are destined at depots, which are spread across the country. From there, the secondary demand is served to more penetrated demand points. Direct parties are also served from the Plant, making a better impact on logistics. The product is then sold in the General Market or MFS as per the demand generated, satisfying the customers.
How crucial a role does the supply chain play in the entire business? For any business, supply chain is associated as the backbone of the company, especially in the FMCG industry where the crest and trough could be so pitched that the single decision regarding the same could change the view & version of the scenario. At AWL, SCM professionals always strive to keep up the sales as well as optimize the cost-related parameters with their experience and new methodologies, moreover we ensure that our top line & bottom line will be maximized by managing an efficient supply chain. People still need to understand that SCM does not restrict itself in pushing sales for any company. The term itself caters to various departments, which could lead any genre of business to its apex. The departments like procurement, warehousing, production & dispatch planning and especially logistics can add so much value to the system. Exploring the depth of such certainties could easily develop business acumen, which is required to be ahead of others in this brutal game of competition.
How complex is the supply chain of the segment you are operating in? The supply chain we are dealing in regulates purely on the demand and supply of the market. That demand may be SKU based, vehicle based or inventory space based. SCM at AWL is mostly affected by the external factors like availability of vehicles, raw material, production limitation of packing locations price fluctuation of crude in international market. Similarly, in our food business, especially atta (Wheat Flour), which falls under perishable products, where the production to consumption cycle is only 90 days, throws upon us a major challenge of continuous replenishment of the same. All these
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factors contribute, to a large extent, in making the supply chain a much more complex structure. But, as you know supply chain is known for its tackling behavior, so particular strategies of SCM are applied on day-to-day basis in order to overcome the hindrances and complexities to contribute towards the growth of the company.
What are the packaging innovations brought forth by Adani? Packaging innovations in Adani involves: • Increasing the film line of the pouch thereby making it more durable • Inclusion of honeycomb sheet in the trucks and rake movement so that the loss could be minimized • Improving the resistance of the redressing material from 3PL to 5PL, thereby making the packaging more robust • Increment in the strength of Jar & Tin in order to minimize the losses.
What has been one of the most challenging tasks while at Adani? Although in my opinion, the SCM department undergoes numerous challenges on a day-to-day basis to fulfil the demand of the counterparts, we know that tasks are always aligned in such a manner where some targetoriented structure could be stipulated and for this, supply sourcing in any FMCG company is the foremost important weapon. At times, there is a situation where there is a lack of supply of vehicles
from the manufacturing location, which could be due to various reasons. The lack of information regarding the vehicle sourcing or we can say, distorted web of information causes our logisticians to restrain themselves in setting up a targeted freight in the market. Cost saving mechanism is one of the important parts of SCM and due to the aforementioned variations, cost sometimes shoots up. The factors are mostly external but lack of information of all those factors restricts us from gaining a deeper insight for a solution.
Export is a big part of your business. What are the EXIM complications and how do you deal with the same? Export is a growing part of our business and it’s the most suitable way to mark your presence in the global market. We supply in countries like Australia, New Zealand, Malaysia, Singapore, UAE & the African Continent. The major EXIM complications, which deal in export are: 1) Countries like Saudi Arabia require Halal certificate on their logo as it has been declared mandatory in their country. Such things should always be kept in mind. 2) Quality should be up-to-the-mark as per the international standards. It is an important point to mark your presence in the market. 3) Legal complication is the major factor, which plays through the transshipment of products.
How do you do supply mapping? Well, there are three important aspects to it: • Demand Planning: Catering to the demands form the customers, which are drilled down to zones, states & cities and allocating them location and product wise. Demand is taken on historical level, which gives a fair idea of the seasonality and trend.
The departments like procurement, warehousing, production & dispatch planning and specially logistics can add so much value to the system. Exploring the depth of such certainties could easily develop business acumen, which is required to be ahead of others in this brutal game of competition. 23
INTERVIEW which is constantly building up with time. Through challenges and experiences, the dynamics become more robust and structured. From the current situation, we envision that the supply chain dynamics will be able to trespass the technology as well as information barriers in the company, saving more time and cost for the organization. We are at the initial stage of mapping end-to-end supply chain in the organization; it also includes exploration of various multimodal techniques and inclusion of blockchain, vendor management system, etc. As time goes on, the system will be more resilient and unsegmented, which will definitely give us an edge. •
•
Vehicle Management: Vehicles are booked through vendors for the locations. It also caters to the multimodal aspect of the system. Inventory Storage: Inventory is stored at depots, which are liquidated by the sales team in a different type of market (GT or MFS).
What are the supply chain strategies implemented by you? Network Optimization Strategy: The entire secondary network of depots, which are catered to through various manufacturing locations according to the demand are optimized and hub & spokes are formed, to give us better serviceability and cost. Freight Mapping Strategy: In order to recognize the freight from each location, a system has been installed to give us information about the previous freight, thereby expanding the insight of the logistician. End-to-end Integration of Vehicles: The end-to-end integration of the vehicle solves various purposes of booking, tracking and database management of the vehicle, which could be utilized in the future for placement reference. WMS Implementation: For better inventory handling and insight of the depot stock, WMS implementation across all depots has shown its impact in aligning secondary sale.
distribution techniques implemented by AWL are: Distribution Techniques:
How strongly aligned is supply chain with Adani Wilmar’s growth strategy?
1) Hub & spokes formation of the depots in order to cater to the demand in an efficient manner 2) Part & Full wagon rake dispatch from the plant for satisfying the customer needs 3) Stock transfer and cross-docking of products for maintaining the optimum inventory level in the depots for the customers.
Adani Wilmar growth is not restricted to growth in a particular segment, it marks its milestone as an overall upliftment in performance for every department & SCM is not a new concept to it. SCM at AWL ladders up by defining the best automation as well as cost beneficiary methods in order to push up the sale. As we are growing in different genres of business, taking a step further from oil to food business, we require more and more skill sets to attain the right time, quality, quantity & information. Under these subsets, the game totally changes for different kinds of products and we, at Adani Wilmar, always strive to produce the best out of it. We believe that the supply chain cost optimization strategy should always be frontline in SCM, thereby giving the self-push of growth under the roof of AWL.
Sourcing Techniques: • Better vendor management in order to explore the skilled and experienced vendors for service provision • Survey and exploration through market intelligence enhances our chances regarding the collaboration with skilled service providers adding value to the sourcing technique of Adani Wilmar • Not only is the exploration of new vendors applied in AWL, but also the improvement of the existing ones has made its contribution in the development of the sourcing methodology. • Existing vendors are identified as per their performance and testified to the knowledge-based aptitude developed by the company and if the performance is above AWL’s parameters, they develop as a separate identity.
What are the innovative sourcing & distribution techniques implemented by you?
How do you see the supply chain dynamics shaping from here?
The various innovative sourcing &
Supply chain dynamics is a terminology,
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Praveen Jain possesses 32 years of rich experience in managing complex supply chain and logistics operations in large professional organizations in FMCG and supply chain & logistics industries. His key areas of expertise include commercial & warehousing, logistics planning, supply network design, profit centre management and vendor management. He is an MBA In supply chain & Operations Management from Sikkim Manipal University and has done Post Graduate Diploma in Logistics Management (PGDLM) from IIMM. He has received Management Development Programme (MDP) from IIM- Ahmedabad and B.Com from Rajasthan University.
PERSPECTIVE
Smartly Connected
with Technology
We all know and verify that the demands on supply chain managers to rapidly respond to change and increase profitability are greater than ever. In this fast moving, demand driven world, supply chains need to meet their desired expectations and strike a winning deal for their respective organizations. This can only be possible if it is backed by technology. Welcome to the era of Smart Supply Chain, which is ably backed by GenX technologies to drive organizational growth. We spoke to a few industry leaders on their perception about on smart supply chains and this is what they have to say… Prashant Khadse, Associate Director, Flipkart India Pvt. Ltd. New age supply chains will be driven by technology-led transformations. It’s going to be process-driven and will require higher skill sets to live up to the ever-growing expectations of our key customers. The kind of speed and the quantum of volume increasing day by day is putting tremendous pressure on us to manage the supply chain with ancient processes. At the same time, it’s of critical importance to understand as to how you are going to develop the skill set because the market demands are fluctuating. There should a unified platform to enhance the skill set of our employees to handle such critical tasks because during peak days, we need to handle volumes going up by 4X higher than the regular days. We also need the supply chain partners who are compatible with the fast changing dynamics. This is going to be the game changer in the coming times. In the Indian market where the logistics is transforming from logistics to supply chain, we need to move up the ladder fast to drive change. We need to change our mindset and create an awareness to be ready to cope in such volatile scenarios.
Naagendra Srinivasa, Head – SCM (Group Apparel), Raymond Apparel Ltd. For me, speed is the smart supply chain and rest all is being considered as the hygiene factor. It’s the speed at which you are able to respond to the requirements of consumers, customers or the business associates. One also needs to possess the ability to change their approach as per the dynamic market conditions. Today’s supply chain doesn’t require a theoretical approach, which is taught in the classroom, you need to have the execution skills in the real-time market and deliver in the desired timeframe that your customer is looking out for. There’s no room to say NO in the current times. The moment you say it, you might lose your previous contract to someone else. Speed and adaptability will have a major role to play in the future to decide how smart and agile you are as a company.
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PERSPECTIVE
Anshuj Rathi, Senior Manager Solutions – Sales Consulting, Oracle India Pvt. Ltd. Today’s supply chains are very complex, which require the integration of multiple processes, applications, technologies, and organizational components unlike the traditional dynamics of distributed operations. Upcoming supply chains will work on what Industry 4.0 talks about where we cannot afford to work in isolation. With the trend fast approaching towards modern SCM systems that involve new technologies like cloud, the Internet of Things (IoT), big data, social collaboration, digital connectivity, and predictive analytics, things become easier for the business if it is ready and mature enough to take advantage of them. We are witnessing a shifting trend towards new, enabling, and disruptive technologies; which make companies smarter, more flexible, and more agile. Today’s supply chain is moving from supply-driven push to demand-driven pull, with a huge focus on the customer service and satisfaction. These changing dynamics are making tremendous headway towards making supply chain more of a growth enabler than a cost center.
Capt TS Ramanujam, CEO, Logistics Sector Skill Council Smart supply chains will require smarter people to operate. Such a disruption is only possible in a vast country like India when the people are equipped to drive the change. At Logistics Sector Skills Council, we are working towards developing smart logisticians by empowering them with the best-in-class technologies, which will ultimately drive the operational efficiencies of an organization. We need to opt for a people-centric approach. While we talk about the technology led growth, we should also keep in mind that technology should not just be able to value-add the operational process, but should also improve the earning capacity of the individuals and enhance overall efficiency. Only then will we be able to truly deliver the Win-Win-Win situation for companies.
Prof Rahul Patil, Associate Professor, SJMSOM, IIT Bombay, Mumbai, India The Indian logistics sector needs to embrace smarter methods to manage the complexity arising due to increased product variety and supply chain risks. Nowadays, information systems have been generating data related to several logistics functions, which can be used to take smarter decisions. Demand data can be used to develop more accurate initial forecasts by using time series forecasting methods that can be fine-tuned by using the existing expert knowledge. Better forecasts will reduce costly last-minute rescheduling. The logistics sector wants to optimize inventories to reduce costs and improve customer service. Several inventory models such as base stock model proposed in academics have now been used by industries across the globe. Our industry can definitely benefit from the use of such inventory models. Our industry also wants to minimize transportation costs by reducing the number of vehicles and the distance travelled while delivering orders to the customers. Again, several efficient methods have been proposed in theory to accomplish these goals. In the developed world, many logistics firms have benefitted by collaborating with academic institutes. A more involved interaction between the Indian logistics and academic institutes is now necessary to accomplish these goals.
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INTERVIEW
Infusing Aroma “Our greatest strength is our product quality and innovation. We believe in offering the best to our customers and in the finest quality possible, which gives us an upper edge against our competitors. While providing the best quality products in the market, we have been able to keep the price at a standard market rate and we have been part of India’s prayers for seven decades now,” shares Arjun Ranga, Managing Director, Cycle Pure Agarbathies, during an interaction… How is the FMCG industry performing over the years? The FMCG industry is huge and is very dynamic. If we take the example of the agarbatti industry in particular, it has been growing many folds since the past few years and it has touched a revenue of `965 crore in FY18. States like Tamil Nadu, Karnataka, Uttar Pradesh, and Maharashtra are showing excellent consumption patterns. Although the industry is largely unorganized, it is flourishing at rapid speed with lot of emerging opportunities. Many new regional players have entered in this space in last couple of years. It is one of the most vibrant cottage industries and we have the scope of providing major employment opportunities especially in the rural part of India. What are your strategies to create a prominent brand position? Our greatest strength is our product quality and innovation. We believe in offering the best to our customers and in the finest quality possible, which gives us an upper edge against our competitors. While providing the best quality products in the market, we have been able to keep the price at a standard market rate and we have been part of India’s prayers for seven decades now. We also boast a very strong distribution network, which helps us in servicing our customers better. The challenge for any FMCG company is to make their product
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available to its consumer. With our strong distribution network, we have been able to achieve that goal substantially. As a company, we are very conscious towards the environment, we are the only Carbon Neutral certified agarbatti manufacturers in India. With that, we have been able to neutralize our carbon footprint from production to store. What are the complexities involved in your line of business? Being the leader in the segment, we face the challenge from smaller players who are duplicating the products in various regions. Of course, these duplicated products lack quality. So our challenge is to make our product available and eliminate the need for duplication altogether. At a larger scale, the challenge is to ensure product quality over decades. But we look at it as an opportunity to innovate and stand out from the crowd. At an industry level, it is a very unorganized market, and the challenge is always to bring everyone under regulations and ensure safety & quality norms. The industry itself works with a lot of rural population and ensuring that the raw material reaches them and the process is smooth thereafter is challenging. All India Agarbatti Manufacturing Associations (AIAMA) is working with a lot of small and large players to set industry standards.
This is a family business. How difficult has it been for you to carry on the legacy and still bring in your own individual contribution towards growth? It was an extremely seamless transition, and right from my childhood, I've observed my family in this industry. The learning of the industry and learning to understand people came naturally to all of us. However, we had to be qualified for the job and learn the tactical
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INTERVIEW parts of it. I had gone abroad for my higher studies and gained a few years of work experience over there. When I returned to the family business, I took my time understanding a smaller part of the business and then went into managing the organization. There have been no great challenges, but cultural change, understanding our organizational behavior are some of the things we faced and worked on consistently to be where we are today. However, the ethos remains the same from great grandfather to this generation. That made it really easy for all of us to understand the decisions and the functioning of this organization. Kindly enlighten us on the entire value chain that goes into making these products. We have adopted a very robust mechanism in our production process. We have a cottage industry model which includes clusters where women from rural areas are engaged in rolling, manufacturing and packaging the products. After the preliminary production, we get the agarbatties back in our factories in respective regions where we add fragrance and do an intense quality check followed by packaging. We also ensure that the raw material we source are FSC certified. With GST in place, we have also strengthened our supply chain and upgraded few of our warehousing
INTERVIEW units to manufacturing units. Our warehouse and distribution arrangements ensure delivery in every nook & corner of the country in the best condition. You have been diversifying your product portfolio off late. How are your various SKUs performing? Very early, our organization realized the need for diversification. An organization can only thrive on innovation and diversification. The idea of a great lifestyle or culture is constantly changing and so has to our products. We have diversified our puja line extensively. Recently we have introduced three new products – Om Shanti Chandan Tika, Om Shanti Pure Puja Oil and Om Shanti Pure Cow Ghee Diya. These products are the result of innovation and responding to changing needs of our consumers. These products are convenient and highly userfriendly, which make them perfect for everyone to use. While demand of agarbatti and home worship products is constantly increasing in Maharashtra, UP, West Bengal and Gujrat, the quality product consumption is strong in Tamil Nadu, Karnataka and Kerala region. Keeping in mind the consumption pattern, we have also innovated region-specific products for some parts of the country, which are doing exceedingly well.
How crucial is the supply chain for your business and how do you manage that? We function in an FMCG industry. Hence, supply chain is crucial for our distribution network. The organization has worked really hard to create this network of distributors. The way forward from here had to be to make our distribution network extremely smooth. Technology has allowed us to create a customized network with each of our distributors. Cycle Pure has recently integrated an IOT based Sales Force Analytics Platform, which allows its employees to monitor processes on their handheld Devices. This App has facilitated Cycle Pure in meeting their delivery targets exponentially. We will continue to upgrade and ensure that our supply chain management is extremely smooth. How is the e-commerce channel working for your line of business? How are you planning to take the omni-channel route? Integration of online and offline is the future. As mentioned earlier, we would want to be available in any platform that you look out for. Our website has products ranging from Agarbatties, to Puja Packs, carefully designed for all occasions. It is a one-stop solution for all products under which we are already available in all formats of retail and have created a strong presence in e-commerce platforms as well. We have our website and a mobile-based application Pure Puja app, which provides instant solution to all the puja needs. We will continue to innovate and be available anywhere our consumers are looking for our products.
With GST in place, we have strengthened our supply chain and upgraded few of our warehousing units to manufacturing units. Our warehouse and distribution arrangements ensure delivery in every nook & corner of the country in the best condition.
method, we have realized that manual packaging is much more efficient than machine packaging.
products. At present, the packaging material we use are all Forest Stewardship Council (FSC) board certified. The raw materials are strictly sourced from a regrown forest and not from a virgin forest as we are very conscious as an organization. Our product packaging is aligned with our brand ethos. With our packaging, we ensure that the quality of the product is intact. Both the internal and external wrapping is done with great care and due diligence. Our packaging process is mostly labor intensive, over the years with trial & error
How do you drive the spirits of employees to achieve the desired results? We have a lot of activities internally for our employees. We have our internal communication team Sampark ensuring that our employees are energized and motivated. We have activities like Ranga Samskuthika Milana (RSM 2018), Stepathlon, NR Antakshari, we also have gala celebrations for Ganesh puja, Independence Day, Republic Day, etc. We also have annual NRPL – Sports event (Cricket Tournament). So all together, we celebrate every
What goes into packaging design? During our initial days, my grandfather was the pioneer in bringing innovation in packaging. While all the companies used tin box for packaging, my grandfather introduced cardboard packaging. His aim was to provide our customers with value for money. He focused on enhancing the quality of the
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important day together. We are a 70-year old organisation and we have many employees who are working with us for decades. We take pride in the fact that we understand people and understand their strengths. Employees are given freedom in taking decisions. We are confident this helps boost their confidence, skill and encourages them to do better. What are your growth strategies ahead? We are amplifying our existing strong distribution network in the country. After GST, we have been able to convert numerous stocking locations into manufacturing units. In the pilot plan, we are converting these units in 6 places. We have started two new plants – Koval Patti and Gingi in Tamil Nadu. We have also recently installed a new manufacturing plant in Ambala, Punjab, which should be up and running soon. In 1948, my grandfather, N Ranga Rao, started the company and within a year, he researched and realised that to be successful in this business, you need three key things: A differentiated product, a brand, and access to the market. Keeping up with the same philosophy and continuing the legacy, our goal is to ensure that when each and every person in the country thinks about prayer and spirituality, they think of Cycle Pure Agarbathies.
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OPINION
OPINION
It’s a Taxing Business “The Government must realize that logistics is not a ‘sin activity’ and must not be taxed in such a prohibitive manner. Logistics is the backbone of any economy. It should be treated as an infrastructural activity. While we have gained the much needed infrastructure status, the road to progress is yet far,” feels Legal Advocate Rajesh Kumar…
L
OGISTICS is regarded as the backbone of the economy as it ensures efficient and cost-effective flow of goods and every commercial sector depends on it. Logistics industry in India is evolving rapidly. It is the interplay of infrastructure, technology and new types of service providers, which determines whether the logistics industry will be able to help its customers reduce their costs and provide efficient services. Despite the weak response, the logistics industry continues to witness growth owing
to the progress in retail, e-commerce and manufacturing sectors. The recent Indian logistics sector comprises of inbound and outbound segments of the manufacturing and service supply chains. Of late, the logistics infrastructure has gained the muchneeded boost from business houses as well as policy makers. Managing the infrastructure to effectively compete with other industries has not been given its due emphasis. Inadequate logistics infrastructure can create bottlenecks in the growth of an economy. The
logistics firms are moving from a traditional set-up to the integration of IT and Technology to their operations to reduce the costs incurred and to meet the service demands. The growth of the Indian logistics sector depends much upon its soft infrastructure like education, training and policy framework as much as the hard infrastructure. To support India’s fast-paced economy growth, logistics industry is very essential. It is estimated that the industry will continue to grow at a robust rate of 10-15 per cent
A major problem and challenge faced by the logistics sector is the problem of taxation. Logistics has always faced step-motherly treatment from tax authorities. The cost of providing logistics services is high because of numerous taxes imposed by the Governments. Fuel makes up almost 50% of the cost of transportation on which prohibitive taxes are imposed. Currently the government (centre plus states) is collecting around 100% taxes (Excise Duty and VAT) on the base price of petrol. Today, diesel attracts almost 66% of Central Excise duty and VAT. Further input tax credit of these taxes is not available as fuels have not been brought in the GST ambit. Therefore, taxes paid on fuels directly enter into the cost structure of logistics. annually. There exist several challenges and opportunities for the sector in the Indian economy. The biggest challenge faced by the industry today is poor integration of transport networks, information technology and warehouse & distribution facilities. Regulations existing at different tiers are imposed by national, regional and local authorities. However, the regulations differ from city to city, hindering the creation of national networks. Trained manpower is essential for the third-party logistics sector and the manufacturing and retailing sectors. It is lacking at the IT, driving and warehouse as well as at the higher strategic level. The sector is in a disorganized state in India. The general perception of logistics being a manpower-driven industry and lack of adequate training institutions have created a crisis of skilled management and client service personnel. Poor facilities and management are reasons behind high level of loss, damage of stock, mainly in the perishable sector. Though practitioners and academicians are slowly becoming aware of the importance of logistics and supply chain the field is still not adequately explored as far as research is concerned. It is essential to prioritize research and development so that the weakness in the industry can be taken care of and improved. These problems still stay of little importance for the logistics sector.
PROHIBITIVE TAXATION A major problem and challenge faced by the logistics sector is the problem
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of taxation. Logistics has always faced step-motherly treatment from tax authorities. The cost of providing logistics services is high because of numerous taxes imposed by the Governments. Fuel makes up almost 50% of the cost of transportation on which prohibitive taxes are imposed. Currently the government (centre plus states) is collecting around 100% taxes (Excise Duty and VAT) on the base price of petrol. Today, diesel attracts almost 66% of Central Excise duty and VAT. Further input tax credit of these taxes is not available as fuels have not been brought in the GST ambit. Therefore, taxes paid on fuels directly enter into the cost structure of logistics. The Indian automobile industry has historically been one of the highest taxed sectors from an indirect tax perspective. Automobile is treated as sin goods under GST and attract compensation cess. Effective rate on automobiles are anywhere in the range of 45-55%. Further, there is input tax credit restrictions on GST paid on automobiles. Such a taxation structure is not conducive to improvement in the logistics sector. The Government must realize that logistics is not a ‘sin activity’ and is must not be taxed in such a prohibitive manner. Logistics is the backbone of any economy. It should be treated as an infrastructural activity. On one hand, we feel that logistics is the lifeline of an economy and on the other hand, we tax everything related to logistics at a prohibitive rate. This amounts to mere a lip service to the logistics sector.
E-WAY BILLS The movement of goods under GST regime is governed through E-Way bills. It has been a great step in improving efficiency and reducing cost of transportation services. It is seen that movement of goods and smoothened and idle time of vehicles has reduced considerably. Still, numerous check posts have been created by various state governments to physically verify the goods. Goods and vehicles are being seized for minor typographical errors and huge penalties are being imposed, even on transporters. Aptly said, law can be changed overnight but it takes time before mindset is changed.
WAY FORWARD Though improvement is perceptible in logistics sector, both in efficiency and cost effectiveness, many other steps are required to be taken. Firstly, logistics sector must be spared of prohibitive tax rates. Further, Input Tax Credit must be allowed on fuel and vehicles under GST regime to eliminate the cascading effect of taxes. Finally, taxmen must be trained not to create undue hindrance in the movement of goods. Rajesh Kumar, Advocate, is managing partner of Rajesh Kumar and Associates, a full service business law firm based in New Delhi. Earlier he worked as Indian Revenue Service officer. He has also authored a book, “Law of Goods and Services Tax”.
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EVENT RECAP
EVENT RECAP
PRESENTING PERFECTION
Celebrating Excellence
Every so often in the supply chain industry, an event is organized, that brings together the absolute best of professionals and carries with itself a plethora of invaluable learnings. This incredible confluence bustling with ideas not only celebrates and rewards innovation, but also educates the minds of budding professionals making their way into the industry. The December 2018 CII Scale Awards held at J.W. Marriott, Pune, assembled the crème de la crème of the industry to disseminate unparalleled knowledge among its spectators… A report by Rishi Kalapi.
T
HE 2018 Scale Awards event was rich with the experience of veterans in the industry- both among the competitors and the esteemed jury members. Timed presentations by the participants and a fast-paced line of questioning from the jury made sure that the audience was showered with unequalled knowledge from supply chains of a multitude of business verticals. Participants from industries like steel, cement, retail, F&B, 3PL and many more, presented their intriguing 7 to 8-minute case studies that detailed their contribution to the industry through unmatched services provided to their respective clients. The narratives that were presented by the participants portrayed the impeccable thought-to-action philosophies that they operated by, which brought forth profound insights into the minds of the seasoned professionals. The powerpacked presentations being made, in two sessions running in parallel, had the audiences captivated till the end, making the event an enormous success. The jury members made fair judgements based on the presentations and the questions that were fired to the participants immediately after. With presenters from giants such as Hindalco Industries Limited, ITC Limited- Wheat and Dairy supply chain teams, Pernod Ricard India (P), Raymond Limited,
Ultratech Cement Limited, Ashok Leyland and many more, one can expect an overabundance of brilliant knowledge. The award ceremony was wellorganized, with Mr R Dinesh, Chairman, CII Institute of Logistics Advisory Council & Managing Director of TVS Logistics Services Ltd. opening with his welcome remarks. The ceremony went on with a special address from Mr Vishal Dhawan, Vice President, Growth Markets, JDA Software. Mr V Sanjeevi, Senior Jury Member, CII Scale awards, powerfully articulated the jury address as he expressed immense pride to being a part of the
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Indian logistics industry and extolled it by saying, “I have seen how the logistics for twenty countries is run and I must say, India is the only country where a 1-Rupee product can be made anywhere in the country and can be distributed across the country.” Mr Anant Swaroop, Joint Secretary of the Ministry of Commerce, in his special address to the audiences, talked about the remarkable progress that the Government is making towards the success of the supply chain and logistics industry. “The Government of India,” he shared, “has recognised that logistics is a very important labour to retain the competitiveness of the Indian industry.”
The ceremony was tied together by the announcement of winners in their respective categories. Representatives of each winning team were called upon the stage to receive their awards and click photographs with the chief guests to preserve the perfect moment. “I am honored and humbled to accept this award on behalf of Hindalco. It’s an even greater honor to have received it from CII,” said Mr Sukanta Das from Hindalco Industries Limited- the winners in the steel industry category. The winning team went on to say, “A very special thanks to CII for organising this prestigious event and selecting us to be a part of it. And an enormous salute to all of this year’s nominees, each of whom have made incredible contributions in the logistics domain.” The Ashok Leyland team, who won in the category of Auto & Ancillary Products, shared their experience, “We are happy to bag the prestigious CII SCALE awards for the second time in a row. At Ashok Leyland we believe in continuous improvements and innovations.” The team also shared how they have seamlessly migrated from a push system to a pull system with regard to the distribution and delivery of vehicles with their dedicated vertical for finished goods in the domain. “Digital tracking of vehicles,” the team added, “with our indigenous applications iAlert & DLiTE, digital end-to-end processes, packing of trucks till customer delivery & focused quality improvement are some of the recent initiatives that not only resulted in customer delight but also yielded handsome savings for the organization. This is another example of how we live our brand philosophy Aapki Jeet. Hamari Jeet.” The award was received by Mr Amrit Bajpai on behalf of the winning team. Ms Shreya Rai was a part of the winning team that presented on behalf of Pernod Ricard India (P) Ltd competing in of Food, Perishables, Beverages & FMCG category. The team shared, “It is a great forum to exchange new ideas and best-in-class practices with supply chain experts of the industry. We got to know about innovative processes being followed by companies to drive customer service and operational efficiency. Digitization, Integrated Business Planning and Operational Excellence are key levers to drive demand driven supply chain.
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Mr Niranjan Thirumale, Senior Vice President and Managing Director of Global Centers of Excellence (India, Poland, and Mexico) at JDA Software shared his thoughts on the event, “It was a fantastic event. There were many powerful case studies. I listened to and interacted with all these companies, who are focusing solely on deep value to their customers, and with a strong vision on digital supply chain and control tower across warehousing and transportation. Mobile apps were a recurring theme throughout the day with strong individual use cases, and the next step would be to demonstrate how these individual successes can be scaled as enterprise level solutions. It was also great to see a lot of focus on process excellence, business benefits and ROI vs. being only technology-centric.” When asked about his perspective on the embracement of technology in Indian supply chain, he shared, “With the changes brought about by structural reforms such as GST, there is a good realisation of the potential to use technology to improve business efficiencies across the supply chain. The technology proliferation and adoption in the Indian supply chain space will accelerate in the following areas in the coming couple of years:
• Cutting down the process cycle time • Enhancement of shop floor automation to integrate MES and IoT devices • Early adoption of control tower software for improved visibility throughout the supply chain • Adoption of machine learning and external events integration.”
Such a forum also helps us meet service providers who can possibly partner with us in executing our Supply Chain Strategy. Thanks, CII, for arranging such a conclave.”
implement policies with respect to priorities to ensure that the customer is serviced at all times. “Start your supply chain conversation now and keep it going,” he concluded.
Mr Vinay Chaturvedi, Director – Supply Chain Management, Raymond Limited accepted the award on behalf of the Raymond – Textile Division team in the Retail category. When asked about what led to the win, he shared, “You need to start your supply chain conversation.” He added, “As a SCM professional, you need to communicate and collaborate with Product, Operations and Sales Managers. Throwing it over the fence and letting things happen may not work all the time. The essence is to collaborate with all stakeholders and keep communicating seamlessly with all cross functional teams.” Mr Chaturvedi went on to add that S&OP is a tool which aids in communication immensely, which has its key objectives to envision, drive partnership and
MERCK, Bangalore the winning team in the Pharmaceutical E Retail category, shared their success mantra, “Our key element to success is the PIE Strategy: People capabilities through lean thinking, Innovation, Engagement and Empowerment. Focussing on Speed at all levels in a value chain kills inefficiency, improves service and optimizes cost.” When asked about the experience of the event itself, the team shared, “This is one the best and most positive events, bringing out the best practices through industry practitioners. It is a platform to understand the direction being taken by the Government and giving hope that India has a winning mindset.”
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RECAP
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Trending GL BALLY
Retailers going for ‘pop-up’ distribution centers to meet supply chain demands
Postmates unveils a robot to speed up and automate its deliveries Vision URBANETIC – Mercedes-Benz’s fitting reply to decongest roads Cities of the future are likely to be larger and more densely populated, so automakers are developing vehicles designed for those conditions. As traffic congestion worsens, last-mile deliveries will be even more of a challenge than they are today. With Vision URBANETIC, Mercedes-Benz presents a revolutionary mobility concept that goes way beyond existing ideas on autonomous vehicles. Vision URBANETIC eliminates the separation between people moving and goods transport. It enables on-demand, sustainable and efficient movement of people and goods, and applies an innovative approach to fulfill the needs of cities, businesses from diverse sectors as well as city dwellers and travellers. The concept reduces traffic flows, relieves inner-city infrastructures and contributes to an improved quality of urban life. The visionary concept is based on a self-driving, electrically powered chassis that can take different switchable bodies for people moving or goods transport. As a ride-sharing vehicle, Vision URBANETIC can accommodate up to twelve passengers, while the cargo module can carry up to ten EPAL pallets. A load space 3.70 metres long fits into a total vehicle length of 5.14 metres. Plus, the concept incorporates an IT infrastructure that analyses in real time the supply and demand within a defined area. The result is a self-driving fleet, with routes planned flexibly and efficiently on the basis of current transportation needs. All of this makes Vision URBANETIC a groundbreaking concept for future urban mobility.
Two interchangeable modules for people and goods To achieve this level of flexibility, Vision URBANETIC is equipped with different interchangeable bodies depending on purpose of use. As a ride-sharing vehicle with a people-mover body, Vision URBANETIC offers space for up to twelve passengers. The modules are switched either automatically or manually, with the automated process taking just a few minutes. The system is based on an autonomous driving platform onto which the respective bodies are fixed. It incorporates all the driving functions, meaning the autonomous chassis can also make its way to its next job location without a body attached. Absolute safety is guaranteed by redundant components for all relevant actions such as steering, braking and acceleration. The cargo module serves as a classic goods transporter. Thanks to its variable load floor, it can be divided into two levels and transport up to ten EPAL palettes. The load space has a volume of 10 m3. Alternatively, the vehicle can be fitted with fully automated cargo-space systems and used as a mobile package station for last-mile deliveries. Multiple further use cases are also conceivable as the concept can be equipped with a wide array of bodies for other sectors and applications.
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Postmates, the food and grocery delivery company that operates across 550 cities in the US, has launched an autonomous delivery robot called Serve in December 2018. It is the company’s internally developed first-of-its-kind autonomous delivery rover. The Postmates Serve team spent the last couple of years analyzing millions of deliveries, researching interactions and conducting thousands of deliveries to ultimately develop the first autonomous vehicle created from the ground up by an on-demand delivery company. According to Bastian Lehmann, co-founder & CEO, Postmates, “We took a design-first approach with Serve that walks alongside people and fits into our communities. We were able to use data to model how food and goods could move around cities even more efficiently when rovers join our existing fleet of more than 350,000 Postmates. Ultimately, we believe that goods should move through cities at nearly zero cost to consumers.” Serve can carry 50 lbs and go 30 miles on a single charge. Customers interact with the robot using a touchscreen and cameras. Serve’s socially aware navigation brings together design and technology in an entirely new way for sidewalk rovers and has the most advanced set of sensors. To communicate, Serve has dynamic lighting in the eyes and a light ring on top to signal movement like a change in direction.
At a time when consumers are demanding faster and more flexible retail fulfillment, supply chains are being pushed to their limits. Retailers and distributors are seeking more warehouse space, but they also need flexibility and agility to move distribution and inventories on the fly. Moreover, Amazon and large retailers have changed delivery expectations to a two-day window, and many retailers need to match it to stay competitive. As a result, retailers are creating pop-up supply chains to ensure they can quickly and cost-effectively respond to seasonal demand spikes and consumers’ desire for fast fulfillment. Pop-up supply chains can leverage assets in a network and support demand changes throughout the year without large capital investments. Manhattan Associates said in a recent white paper that the blending of direct and store channels has radically changed retail supply chains. It is no longer enough that they simply be efficient: They must also be agile, nimble and supported by technology and organizational flexibility. Retailers are seeking to achieve this through innovative arrangements with third-party logistics providers (3PLs), alternative warehousing
solutions such as self-owned networks, drop shipping models or outsourced 3PL networks. Another growing trend is ‘micro warehousing’, where retailers put small distribution centers close to large urban areas and hold a limited selection of popular SKUs, said Eric Lamphier, senior director of product management at Manhattan Associates. Pop-up distribution centers must be more flexible, portable and adaptable as many of these spaces can have low ceilings and limited configurations. Many retailers are using small robotics and automation for such facilities. One essential element of a pop-up warehouse is the right IT infrastructure. Retailers need a high-level of inventory visibility and accuracy to ensure just-in-time deliveries and the most efficient fulfillment. Many of these distribution centers are holding limited selections of the most popular configurations of in-demand products. Manhattan said many retailers are using ‘lightweight’ cloud-based warehousing applications to run these facilities. “These virtual WMS-lite systems can be rolled out in days and offer a good hybrid solution for this need,” the report said. Some retailers are even looking to on-demand or ‘crowdsourced’ solutions that transact warehouse space between buyers and sellers. On-demand warehousing enables companies to access warehouse space on demand and pay only for what they use, instead of having to rely on longer contracts with 3PLs. The options also enable retailers to more efficiently scale and grow at a time when rents are near an all-time high. And for those with excess space, these platforms enable them to recoup a part of their overhead.
The UK Government wants plastic producers to pay for plastic pollution UK has launched one-of-its-kind strategy that will make manufacturers responsible to dispose or recycle plastic packaging that they manufacture. A wide-ranging waste and resource strategy published by the Department for Environment, Food and Rural Affairs (DEFRA) in December 2018 also pledges food waste collections for every home in Britain. The move by the Environment Secretary, Michael Gove, aimed at boosting recycling rates of single-use drinks containers, would see a returnable charge applied on the items at the point of sale. The primary aim is to eliminate avoidable plastic waste and boost recycling. Manufacturers will be encouraged to design longer-lasting products than can be more easily repaired rather than thrown away. “We will cut our reliance on single-use plastics, end confusion over household recycling, tackle the problem of
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packaging by making polluters pay, and end the economic, environmental and moral scandal that is food waste,” Mr Gove said. Defra said it will extend so-called Producer Responsibility program, which currently requires companies pay 10% of the cost of waste they put on the market. A consultation will be announced in the new year that asks producers to pay the full net costs of waste they produce for packaging. Defra said it plans to have new laws in place by 2023 that will match or exceed EU packaging and recycling targets for 2025 and 2030. “Through this plan, we will cement our place as a world leader in resource efficiency, leaving our environment in a better state than we inherited it.”
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