Celerity, in business through Supply Chain May June 2018

SUPPLYCHAIN.CELERITYIN.COM May - June 2018 Volume 2 Issue 3 For private circulation only

PLAYING CATCH UP Somnath Chatterjee, Head – Procurement & Logistics, ITC Ltd (Foods Division), elaborates on the expanse of Indian cold chain infrastructure

A Cool Place to be India’s potential to emerge as the food factory of the world by 2030, can only be realized with innovative, affordable, efficient and sustainable cold chain solutions

HI-TECH IN THE BEAUTY BUSINESS Efficient, bimodal supply chain response is now a necessity, asserts Arjun Varma, Supply Chain Director, Nivea India

PUBLISHER’S NOTE

A Place in the Sun Dear Readers, We have entered the hottest month of the year and the unbearable heat is either beaten by retreating to cooler climes or consuming food which cools our body. As our homage to the season, we decided to do a cover story on cold chain. Industry veterans and practitioners share their optimism as well as day to day challenges in getting that ice-cream or fruit or other foods to the consumers in their required temperature range.

The optimism stems from the fact that as India realizes its potential to be food factory of the world, cold chain will grow by leaps and bounds. However, the current constraints of infra, quality processes, energy availability, connectivity etc. are still waiting to be addressed conclusively. However, given the demand, these issues will have to addressed innovatively and without adding to the costs substantially.

The cold chain service providers who are just playing catch up will be on thin ice while those genuinely addressing constraints proactively will get their place in the sun.

This issue also covers a few thought pieces on making us better at our work. To add more variety, an interview on the electric chimney business in India makes for an interesting read.

The e-waybill rolled out in April with a few ambiguities. While these get resolved by the government, the on-ground authorities should therefore not ignore the intentions of this law. Detaining vehicles unnecessarily or imposing penalties due to certain misunderstanding etc. could demotivate businesses.

Standardisation of e-waybill under ‘One Tax One Nation’ is a laudable effort, the government should remain proactive in ensuring a smooth ride for businesses.

Please do write in. We continue to wait for more bouquets or brickbats.

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

May - June 2018 Volume 2 Issue 3

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COVER STORY The CHILL Factor As India is set to discover its potential to emerge as the food factory of the world; it is up to the industry members to be ready and also get others ready for this growth journey, with innovative, affordable, efficient and sustainablecold chain solutions for tomorrow’s India and bring that CHILL factor the country needs to be at par with the rest of the world.

23 The Perfect Concoction Anil Tomar, Director – Operations, Danone India, reflects upon Ownership and Expertise as the driving factors for success.

18 FOCUS It’s a Deal INTERVIEWS

14 Playing Catch Up Somnath Chatterjee, Head – Procurement & Logistics, ITC Ltd (Foods Division), asserts that the selection of right supply chain partner and measuring, monitoring quality parameters periodically are effective way of ensuring quality in supply chain.

20 Hi-tech in the Beauty Business Arjun Varma, Supply Chain Director, Nivea India, stresses that in today’s VUCA world, adaptive and agile response ability is critical. Nothingis cast in stone except the concept of ‘Consumer first’.

Vijendar Rao, Chief – Procurement & Supply Chain, HSIL Ltd., elaborates on the importance of effective negotiations in closing a business deal and steps to reach the objective, especially from a commercial perspective.

26 LEADERSHIP The modular way Pralhad Bhutada, CEO, Elica PB India Pvt Ltd., takes us through the illustrious journey of electric hoods evolution in India.

29 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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COVER STORY

The Factor The Indian cold chain industry is expected to clock a CAGR of 13-15% in the coming five fiscals through 2022 compared to the average CAGR of 11-13% in the previous five fiscals. This will potentially swell the industry from `24,800 crores in 2017 to `47,200 crores in 2022. This economic progress also denotes India’s potential to emerge as the food factory of the world by 2030.

As India is set to discover its potential to emerge as the food factory of the world; it is up to the industry members to be ready and also get others ready for this growth journey, with innovative, affordable, efficient and sustainable cold chain solutions for tomorrow’s India and bring that CHILL factor the country needs to be at par with the rest of the world.

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T

he cold chain industry in India and globally has witnessed an exponential growth over the last 5 years primarily because of the shift in consumption patterns. The US leads the world’s cold chain storage accounting for 15% of total capacity.

The cold chain industry grew at 20% during 2012 – 2016. As per some industry reports, the cold chain market was pegged at $167 billion in 2016 and is expected to touch $235 billion by 2020. The emergence of the middle class and increase in disposable income have contributed to increase in demand for cold chain products like fresh and organic produce and the consumers want the same kind of product, to taste the same doesn’t matter the location.

This has resulted in growth of cold chain industry to be fastest in the APAC region. Various industry surveys suggest that different temperature zones should be maintained and if the produce is subject to temperature fluctuations, it must be tested for damage to avoid deterioration. “Using cold chain infrastructure, shelf life of food products can also be increased. Owing to these factors, there has been a rise in demand of cold chain and entry of many companies entering this segment, which has helped organizations like ours in scaling up rapidly and providing fresh, top quality products to our customers,” informs Ghanshyam Singh, Director, SCM and Quality Assurance, Chai Point.

Adding on the same, Mihir Mohanta, General Manager (SCM), Mother Dairy, illustrates that the cold chain industry in India is evolving, from the potato-based warehousing cold stores to an end-toend cold chain solution system. The market is gradually getting organized and focus towards multi-purpose cold storages with integrated back & frontend. Quick service restaurants (QRS) across India are penetrating faster, even in small towns. With consumers shifting to fast-paced lifestyle, changing eating habits on increasing purchasing power, they are looking for more convenience & ready food solutions. This is fueling demand for cold chain services. On the back-end, the export-oriented grapes industry is building up its farm centric pack houses with pre-cooling infrastructure enabling exports of more than 7000 containers of grapes to Europe &Middle East. The shelf-life &

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COVER STORY availability of Indian apples is improving with the advent of Control Atmosphere (CA) technology. Today, one can get stored Indian apple even in the month of May/June. Frozen veg (green peas, corn, vegetables & french-fries) is also expanding its network & slowing creeping into urban consumers plates.

The volume of frozen veg industry today is of about 2.6 lakh MT/ year.

The pharma industry is growing on a sound note, as there is a widespread of private hospital network. Hence, the demand for precision & dedicated cold chain services is gaining traction. As per TechSci Research, Indian frozen food market stood at $310 million in 2017 and is projected to grow at a CAGR of over 16%.

Shobhit Jain, Head – Supply Chain, Pizza Hut at Yum! Brands, elaborates,“Cold chain sector is showing strong growth on the back of both demand and supply side factors.

Growth is coming because of robust demand in categories like dairy and fresh produce. Food service and retail sectors are showing growth which, in turn, is driving the growth in cold chain. Consumers are also getting more aware and demanding better quality and safe products. On supply side, there is investment in better cold storage facilities and reefer vehicles. There is also support from government. This confluence of favorable demand and supply will continue to drive strong growth in cold chain. At the same time, there are ample opportunities to improve performance on quality & processes and adoption of global best practices. We need to focus on quality growth. This will be enabled by consolidation and emergence of bigger and organized players in the system.”

According to Debajit Bhattacharyya, VP – Procurement, Havmor Ice Cream Ltd., India’s cold chain sector is a combination of cold storage and refrigerated transport. The Industry is growing at a CAGR of 20%. The cold storage facilities (appx 6300) unevenly distributed across the country and mainly used for potatoes. More than 50% of those are located in West Bengal and Uttar Pradesh. In spite of several governmental initiatives, organized players in this field are very less (8-10%). In recent times, India has been developing at a quick pace, which has resulted into manifold increase in

horticultural product. Around 20 – 40% of theseproduce is getting lost due to supply chain inefficiencies. So, in spite of 20% growth, the performance of cold chain industry is way behind the expectations or requirements.

On similar vein, Anand Sen, Business Head-Temperature Controlled & Express, Future Supply Chains, informs, “There has always been a shortage of cold chain capacity but sustained interest and increase in demand from new sectors such as fruits & vegetables, meat, seafood and bio-pharmaceuticals, which are mainly exported oriented, has resulted in an addition of about 4.5-5 million ton of cold chain capacity in India. Stringent food safety norms and regularizations have necessitated criticality in temperature compliance across the value chain. Hence there has been growing preference for organized players compared to unorganized ones.

Also, there has been an increased focus by the Government of India on developing farm to fork cold chain infrastructure as seen in the recently announced SAMPADA scheme. Setting up of pack-houses is thus being an emerging business opportunity with multi-product cold stores within 50-100 kms from the farm gates as collections centers and increased investment in refrigerated vehicles for distribution purpose.”

POKING ISSUES There are many challenges that come in the way of successful operations of cold chain. Some of them include high cost of setting up and cost of operations.

For some items like core vegetables, this implies a high proportion of cold chain cost in the overall product cost; availability of skilled manpower especially drivers; lack of standardized and good condition vehicles which impacts efficiency and product quality, etc., states Jain. Singh avers that with the explosive growth in cold chain industry, a number of challenges have come as part of the package. These include: TEMPERATURE MAINTENANCE: The single biggest challenge is maintaining the right temperature when moving food products from one point to the other. It starts right from the point when the item is sourced to kept in the warehouse to transportation in

Shobhit Jain,

Head – Supply Chain, Pizza Hut at Yum! Brands There are gaps in infrastructure that could impact product integrity. One of the reasons for this is too much fragmentation in the industry and lack of focus and mindset on quality. Companies need to work with service providers to elevate the infrastructure and build awareness for quality. Processes are not clearly and adequately defined leading to various issues like delays, temperature abuse, product damage etc. Comprehensive SOPs and manpower training is required. Level of warehouse automation should be increased.

between cities and finally at the store level. The laws governing movement of heat-controlled temperature sensitive products, especially in the pharma sector, have become more stringent over the years. These changes have led the companies to define a more precise specification, thus leads to dependency on highly secured cold chain solutions.

Industry standard is to maintain -18°C for frozen foods and between 0-5°C for food in chilled state. “At Chai Point, we maintain the temperature between 0-5°C as well. It is important for the exact same temperature to be maintained at every stage of product movement, otherwise the product will not only lose its taste and freshness but can also go bad. This results in a loss for the company and a tarnished image among customers,” adds Singh.

CUSTOMERS’ EVOLUTION: A decade ago, cold chain was normally associated with the right packaging and logistics. Now with newer things being introduced, we have definitely rocketed forward. Process, temperature monitoring, qualification, validation of a solution and control movement have become integral elements of cold chain’s value proposition. In addition to that, customers are getting exposed to learning more about these techniques and gaining knowledge on the same.

This means that both companies and cold chain partners have to stay a step ahead to meet customers’ quality standards and expectations.

GOING GLOBAL: With enterprises

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out to fulfill their global ambitions, it means that now cold chain companies have to be present in locations outside their home country and be well-versed with the weather conditions across the different regions of the world. This means that they have to be aware of environmental conditions and custom regulations, which has a huge impact on shipping and packaging requirements.

While offering startling stats, Mohanta states that approx 104 million metric ton of perishable produce is transported between cities each year. Of this figure, about 100 million metric ton moves via non–reefer mode and only four million metric ton is transported by reefer. Of the 4 MMT of perishables transported in refrigerated vehicles, ~80% are utilized for milk and milk products transportation. There is a significant value loss owing to this. As per the study conducted by CIPHET (under Ministry of Food Processing), harvest & post-harvest losses of fruits & vegetables alone are 31.5K crore. On the other hand, there are other challenges which the industry is facing such as: » Low capacity utilization of cold stores – Average capacity utilization is 73% across years. » Most of the cold stores are single commodity and are utilized for one season during the year.

Unfortunately, Potato occupies 75% of volume but generates only about 20% of revenue & 23% of the multiproduct storage generate 54%.

This has serious impediments for cold store viability. » Increasing real estates & power

tariffs costs also negatively affect the viability. » The industry is highly fragmented with unorganized sector accounting for 80-85% share of the capacity. » India has about 7100 cold stores but more than 60% of the capacity is available in only two states of UP & WB. Adding to this, Sen highlights that temperature-controlled services especially transportation, have the dual challenge of being time bound and temperature sensitive. Customers expect high service levels at par with express delivery and zero deviation in temperature. Much of the desired service levels and temperature adherence depends on the driver community and hence it is imperative that this community is given its due respect. Currently availability of trained drivers and their retention is one of the key challenges, which the industry is facing. Skewed demand for temperature-controlled vehicles in the long-haul sector (loads majorly concentrated in west and north compared to East and South) results in improper utilization of vehicles in reverse hauls.

Anuraaga Chandra, Head – Cooling & Heating Sales, Danfoss India Region, says, “In the current scenario, one of the most critical challenges is that of lack of cold chain warehousing capacity, as only 25% of the capacity is now available for fruits, vegetables, processed foods and pharmaceuticals, whereas 75% of the capacity is created for handling potatoes. Additionally, there exists

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COVER STORY low awareness at the grassroot level in handling temperature-sensitive products.”

Fuel costs in India constitute around 30% of operating expenses of cold storage in India as compared to 10% in the West. Further, cold storages are dependent on steady supply of power.

Since most Indian regions face power cuts, companies are forced to invest in power back-ups, which further pushes up the capital investment requirement.

One of the biggest hurdles that companies continue to face is the availability of cold chain spaces in India.

Though, over the last few years, there has been an increase in the number of cold chains across the country, but this business is capital intensive and the rate at which cold chains have mushroomed in the country still don’t meet the demand from the enterprises’ side. According to a report by NCCD, under department of agriculture and farmers’ welfare published in 2015, India needs additional creation of around 70,000 modern pack houses, 3.27 MT of cold storages, 53,000 refrigerated transports and close to 8,500 modern ripening chambers.

These numbers present a clear picture of the demand of an integrated cold chain infrastructure needed by the country. Singh believes that there is a need to formulate a formal policy to address the development of farm-gate infrastructure development like modern pack-houses at the production areas, pre-conditioning of the produce for the market movement. These need to be linked to the front-end by actively refrigerated transport, through which efficient long-distance movement is

COVER STORY possible without damaging the produce.

To balance other variations in demand generated by local availability of fresh produce, a higher storage capacity centers should also be set up to store buffer produce and plan the supply as per perishability of each product type. This will also benefit the MSME sector, which focuses on pack houses, food processing and also generate jobs at the rural level.

Revealing more startling stats, Mohanta elaborates, “If you analyze the Indian cold storage industry, you would find about 88-90% of the market share is with temperature-controlled warehouses and remaining 10-12% comprise of temperature-controlled vehicles. Our cold chain industry is skewed to cold store centric. The study by NCCD & NABARD indicates there is not much of gap between requirement (35.3MMT) & availability (32.8MMT) in cold storage per say but the gap is in the 1st mile and last mile connectivity. There is a very large gap between requirement and availability of pack houses (required- 70,000 & available-250) & transportation (vehicle required- 62000 & available-10000).”

TECH ENHANCEMENT Technology is an important enabler for improving quality, reliability and efficiency in cold chain. Jain avers that there are ways in which companies can deploy technology to their best advantages. He suggests some of the tech tools that would aid in enhancing the operational efficiency of cold chain in the country. These include: » Deployment of sensors (temperature / humidity) and enablement of alerts

Debajit Bhattacharyya,

VP – Procurement, Havmor Ice Cream Ltd Refrigerated transportation is still in the nascent stage in India. In comparison, France is reported to have 5 million ton in cold storage space, has about 1.4 Lakh reefer vehicles, while UK is having 80K refer vehicles.

In USA, appx 80-85% fresh fruits and vegetables move through cold chain. India is having less than 10K refer vehicles and no domestic refer rail options. These figures reflect the need gaps that exist in the system as well as provide tremendous opportunities for players to growth their expanse through innovative means & ways.

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for non-compliance, which will ensure product integrity and quality » Adoption of technology (IoT) for optimizing energy consumption in cold storage and transportation » Real-time visibility on product movement to customers » Improved vehicle utilization through backhaul availability that can be enabled by optimization tools » Warehouse automation for better efficiency and faster turnaround times.

As we have already established, how paramount it is to maintain temperature to ensure the best quality to our consumers. Seconds Singh, “We lean on technology and appropriate instruments to achieve that. For instance, while products are being transported from Bengaluru to Mumbai in a cold chain truck and for some reason, if the temperature changes, even for a few hours, the product quality is likely to drop. Thanks to technology today, we can use an array of tools to not only keep the products at the right temperature but also monitor the same.” By using temperature sensors and GPS to self-reporting alerts, the companies can monitor the temperature of the produce at every minute of the day. There are highly equipped vans that can allow monitoring the temperature, location, humidity, and speed of the van in real time. Advanced tracking abilities such as these, enable companies to receive advance warnings of any changes or malfunction; where timely alerts can help the companies flag the issue and control the damage before it happens.

According to Mohanta, Indian

Anuraaga Chandra,

Head – Cooling & Heating Sales, Danfoss India Region There are three major bottlenecks in the growth of cold chain – lack of energy, poor connectivity and limited availability of land. Because of these reasons, the private sector is not having proper incentive to invest in cold chain. There are many leading agriculture producing states such as Uttar Pradesh and Bihar where electricity is hardly available for 7 to 8 hours in a day. Similarly, many regions of the country like north-eastern region are poorly connected with other regions of the country. Acquiring land and getting all government clearance is not very easy task, while establishment of cold storage, one of major elements of cold chain system, is totally dependent on availability of land and government clearance. Without fixing the above problems, one cannot expect significant improvement in India’s cold chain system and hence doubling farm income.

consumers are value conscious. They are averse to pay more or pay extra unless they realize definite benefits.

The role of technology is very crucial to improve benefits & reduce cost. So, technology upgradation & replacement has to be a continual process in this industry for penetration to new markets new users. Investors have to look for multi-commodity, energy efficient & environment friendly technology. Chandra states that with the advent of latest digital technologies, several ‘easy to understand and use’ solutions at affordable pricing, is now available in the market to address the challenges. In this area, currently we see lots more start-ups exploring new business models. For technology to enable this expanse, creating successful and sustainable business models, which address the needs of both the farmer and the consumer will be the gamechanger.

GLOBAL BEST PRACTICES India needs to learn a lot from its global counterparts when it comes to adopting best in class practices. Jain highlights that the country can catch up on certain aspects to offer a value chain that best matches global standards. These include right design of cold storage to maintain product quality / integrity and ensure higher efficiencies; facility with multiple chambers across temperature ranges; world-class infrastructure to maintain product integrity (eg:

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right temperature at loading docks, no cross contamination and other hygiene principles, etc.); palletization which ensures faster turnaround time and minimizes temperature abuse; automation like bar-coding for expediting put-away process and better inventory accuracy; and robust SOPs / SLAs. To build a reliable cold chain system, the following practices needto be adopted by the industry, notes Mohanta: online/centralized live temperature data logger monitoring systems; conduct periodic air leakage test for Insulated Reefer Boxes (IRB) & get them rated; maintain and manage adequate internal accessories for air circulation; adopt SOPs for loading, unloading & temperature proving; and pre-cooling of refrigerated vehicle to -18°C prior to loading of the frozen products.

Breaching the integrity of cold-chain in storage or transportation is a crime. The stakeholders involved need to find ways to manage it.

companies like ours, it is logical to outsource this entire piece, but at the same time, use technology to monitor is closely to ensure the quality of the products reaching the end-consumers.

The main advantages of signing up with third party are: COST: Logistics is core specialty of third party providers; their expertise in the area is likely to be superior to that of a company’s. Such specialist providers have the time and resources to keep their tech updated, ability to meet technical demands in a more cost and time efficient manner. They help company management to reduce overall inventory costs as well.

3PLs’ GOVERNING ROLE IN MATCHING UP TO THE DEMANDS

CAPITAL COMMITMENT: Companies outsourcing logistics don’t have to worry about maintaining and managing their own warehousing and transportation operations. The 3PL firm does all these in a far more efficient manner and the capital required to contract such specialists is lower than a company investing into building the entire infrastructure in-house and cost overheads of running it.

3PLs’ role is very crucial in terms of preserving, protecting & improving product shelf-life, so as to improve the product utility for a longer spread of time & geography. Singh elaborates that setting up a cold chain infrastructure is a high investment business model.

Thus, for small yet fast growing

FOCUS ON CORE COMPETENCY: Running a large-scale business is complex and it is not possible for a company to have expertise in every function. Thus, it is advisable to hire experts in form of 3PL to do this while as a business you can focus on building

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COVER STORY on your core competency, which your product or service for your consumer.

Talking about the desired expectations from the service providers, Jain offers these valid points: » Product integrity and safety: These providers need to have systems and controls in place to ensure 100% food safe and quality delivery. » Real time visibility: Shipment tracking and temperature compliance » They should be able to ensure availability of vehicles to manage peak loads especially during summer time (which typically sees shortage of vehicles) » Faster turnaround times for part loads » Ability to seamlessly work with suppliers for order management and delivery » Ability to scale up and provide services across multiple regions of the country » Capability to provide value added services like material planning.

While Singh expects service providers to maintain the required temperature throughout the cycle; Continuously check the products; storage as per the norms laid out for the specific product type; ensure adequate air flow, etc.

Apart from these, they need to ensure that there’s no overstocking happening; goods are being stacked in the correct fashion; when moving from point A to B, the temperature needs to be kept in check. And in case of an anomaly, flag

COVER STORY it to the company immediately. On the other hand, the vendor, while taking the delivery, should check the temperature of the products and stack it as per the norms specified with the type of the product.

Offering the 3PL perspective, Sen says, “FSC had entered into the temperature-controlled logistics space in order to leverage its expertise in managing the value chain for the industries like dairy, fresh fruit and vegetables, frozen food and quick service Restaurants. FSC has planned to expand its warehouse footprint across tier I and II cities in India in order to cope with the growing demand from in-house businesses of Future Group as well as external customers from the above sectors. There has been substantial focus from the Group in developing the farm to fork model, which will lead to backward integration in times to come. Hence significant investment has been planned in creating state-of-the-art warehousing and distribution model to serve the customers with high quality of services.”

chain network can be used to link production centers to the consumption centers through cold chain grids. These can connect key production areas with centralized distribution channels that ensure last mile delivery of the produce in the desired quality and quantity. Additionally, by knowing the markets and timing of the harvest, the producers can meet the demand and have a higher share of wallet with reduced loss. Farmers and owners of the produce can reach newer markets to realize greater economic value. This boosts their incomes and incentivizes higher agricultural production – a win-win situation for farmers as well as consumers, shares Chandra.

An optimized supply chain should be able to give their customers what they want, when they and yet keep the costing under control. “Supply chain starts from tier II or subcontracted supplier to the primary suppliers. As the tier II suppliers provide us with raw materials, components, etc., it becomes important to know who subcontracted suppliers are, materials they are providing, costing and their lead times. This also gives the benefit of negotiating on the basis of volumes as more often than not, many of the tier 2 suppliers provide services to more than one vendor of the company. Thus, it is important that you maintain visibility on the overall supply chain and keep the costs low at the same,” states Singh.

Ghanshyam Singh,

Director, SCM and Quality Assurance, Chai Point The cost of operating cold chain in India is double of what the West incurs, which is $30 per cubic meter.

Our annual wastage has been pegged at $440 billion annually. Thus, in order to reduce annual wastage and avoid selling diminished quality produce to the consumers, technology seems to be our best bet to emerge as a cold chain hub with global standards. By using temperature sensors and GPS to self-reporting alerts, companies can monitor the temperature of the produce at every minute of the day. There are highly equipped vans that can allow monitoring the temperature, location, humidity, and speed of the van in real time. Advanced tracking abilities such as these, enable companies to receive advance warnings of any changes or malfunction; where timely alerts can help the companies flag the issue and control the damage before it happens.

Some key factors that are driving the demand for cold chain infrastructure are growth in the organized retail market, urbanization and lifestyle changes. All these have been increasing the demand for processed food industry in India. In order to cope with the growing demand, government has taken initiatives in announcing subsidy schemes to facilitate investment in cold chain infrastructure. High growth sectors such as pharmaceuticals, quick service restaurants and frozen food focus on high levels of temperature compliance. Hence, they prefer services of organized players with better process compliance and techniques. Rising demand in exports for products like frozen sea food, meat, processed food, horticulture has increased the requirement of proper cold chain services.

SUPPLIER INVENTORY VISIBILITY: As a company, you should be aware at all times, the inventory your supplier holds because if he runs out of your product at his end, your operations are likely to be impacted. Sharing this information can be beneficial for the supplier too, because it can help them do their inventory management more efficiently.

“We have built SHARK, a platform, which connects the entire operations cycle of Chai Point. Right from vendors to warehouse to stores, POS. Everything moves through the cloud-based platform, which enables us to plan our supply chain strategy and execute it with minimum scope of error,” shares Singh.

According to Bhattacharyya, endto-end optimization can be achieved through Information Flow Optimization.

An information flow system will tell the farmer, a logistics service provider or a food retailer on how much of storage and transport capacity is available for a perishable product at any given point in time and within reasonable reach. These pointers summarize ways to optimize end-to-end supply chain in the best way as offered by Jain: » Effective forecasting by using point of sales (or available downstream) data » Incorporating various inputs like business & item level seasonality, promotional spikes, and deploying

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OPTIMIZING END-TOEND SUPPLY CHAIN PLANNING An efficient cold chain mechanism counters the perishable nature of food, thereby extending its saleable life cycle. It applies technology to stretch the marketable time of a perishable product, for a longer duration. A cold

Anand Sen,

Business Head – Temperature Controlled & Express, FSC

right forecasting approach & method » Mapping of inventory parameters and deploying optimal safety stock norms at item level » Segmentation of service levels basis criticality or business impact » Collaborate with suppliers for improving supply reliability through timely ordering and visibility into rolling forecast » Work with suppliers to minimize order turnaround time and its variability.

UNLOCKING THE POTENTIAL OF INVESTMENT FROM HARVEST TO RETAIL Companies need to make food safety an utmost priority and develop right mindset, culture and skills in the organization. Jain feels that selection of right partners – both suppliers and 3PLs who have capability to ensure end to end temperature compliance (supplier’s supplier, supplier storage, primary transportation, storage at DC, secondary transportation and beyond), would hold the key for enhanced performance.

Additionally, as Singh elaborates, “We need cold chains set up in close proximity of the source or the produce, so that post harvesting, it can be stored nearby for further transportation as per the market demand scenario. For eg: Potatoes, are mainly grown in Uttar

Pradesh. If there is no cold chain facility, then the farmers will have to move the product from ambient temperatures to other locations with cold chain facilities.

This may result in a large part of the harvest going bad and loss of sale for the farmers. Cold chains should be set up near the source, should have regular power supply and a good roads network for easy transportation of the produce from the cold chain to the market.”

Talking about the upcoming sectors that will drive the growth of cold chain in times to come, Chandra says, “Agriculture and horticulture will emerge as the sunrise sectors for India in the near future, with cooling and refrigeration experiencing high growth. Wherever there is a distance between the production centre to the consumption centre, there is an opportunity for efficient cold chain. In this regard, India has a long way to go.

The penetration of refrigeration in China is 45%, whereas in India it is a mere 4%. So, there is an impending need for more cold chain solutions to bring meat, seafood and horticultural products to market without wastage and support in the value addition of produce.”

Currently, there is a lot of policy push from central and state government to create more cold chain infrastructure across the length and breadth of the country. For e.g., 101 integrated cold chain projects have been sanctioned

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Mihir Mohanta,

Rohit Batra,

Capacity utilization & electricity load planning are very critical for the business. Companies with better visibility of the supply chain in terms of available load, time & space can plan better than the unorganized players.

However, cost optimization also needs an understanding on product characteristics like carrots have almost 10% more refrigeration load than peas and sweet corn. To save on efficiency, one should not go by thumb rules & put everything into one basket.

Cold chain industry is evolving at a rapid pace over the past few years. As of today, there is acute shortage of the required infrastructure and hence there is ample opportunity to grow in this industry. Automated cold warehouse infrastructure to minimize / eliminate possibility of manual errors and to increase speed to market are some of the global best practices that India can opt for to better performance.

General Manager (Supply Chain), Mother Dairy

and assisted in 2016-17 by the Ministry of Food Processing, but they are yet to be completed. These projects are expected to leverage a total investment of `3,100 crore for the creation of modern infrastructure for the food processing sector. These 101 cold rooms are expected to create an additional capacity of 2.76 lakh ton of cold storage/controlled atmosphere/frozen storage, 115 ton per hour of individual quick-freezing capacity, 56 lakh litres per day of milk processing, 210 ton per batch of blast freezing and will include 629 refrigerated/insulated vehicles; this will be a great milestone in our journey towards achieving food security in the nation. This is not all, there are many more such initiatives to help minimize the food loss in the nation and to help double farmer’s income, states Chandra.

GOVERNMENT INITIATIVES – ON PAR? The Ministry of Food Processing has placed cold chain under the infrastructure category and has launched a string of initiatives to promote setting up of cold chain and ancillary infrastructure across the country. Singh adds, “Their flagship program ‘National Horticulture Mission’ has been reaching out to private enterprises for partnerships and offering a slew of subsidies and exemptions.

Between 2009 –12, more than 1,000 government controlled cold storages have been developed with a spend of Rs660 crore. The subsidy has also been enhanced from 25 to 40%. We believe the schemes launched to grow the

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sector have been launched in the right spirit but due to lack of transparency, the implementation has been slower than expected.” Thus, the sector needs a desperate push from both the state and Central Government to capitalize on the opportunity of building a cold chain industry, which can boom because of the local demand and consumption.

While ample measures have been taken in the recent past by the government, still a lot more needs to be done. Mohanta offers three such changes that need attention from the authorities: » Government authorities to specify/ define guidelines for commodity specific transportation/ storage requirements as is done by United States Department for Agriculture (USDA), which is the regulating authority for agricultural production in USA and has instructions regarding safeguard and transport of freshly harvested products. For example, Carrot & Sweet corn will have two different sets of temperature & humidity requirement to preserve their food value. » Government to create regulatory body/ framework in India to define manufacturing standards, certification and rating of Insulated Reefer Boxes (IRB). American or the European IRB standards currently followed or not followed are designed for their environment temperature of 30-35°C, while in India, temperature goes as high as 50°C, hence, the European or American standard may not work.

» Government to help in formulating masterplans to link commodity clusters (crop production), storage (warehousing) hubs & retails/ consumers centers (markets).

According to Bhattacharyya, lower cost of funding for setting up cold chain infrastructure; promoting campaign awareness to educate people about the importance of cold chain facilities; ensuring better and efficient refrigeration technology to further improve shelf life; and power subsidy to cold storagesaresome of the parameters that will help the industry to be at par with the rest of the world and enhance performance. Sen avers that the government has shown great level of interest in developing cold chain infrastructure in order to support the agricultural sector. ‘Operation Green’ proposed in this year’s budget has been allocated with fund to promote Farmer Producer Organization, which would include agricultural logistics and primarily cold chain infrastructure.

Allocation for ‘Kisan Sampada Yojana’ has also been increased, which will further attract investors to develop cold chain facilities.

ENSURING QUALITY THROUGHOUT THE VALUE CHAIN India is at the threshold whereby 2030, we expect that over 70% of the population will live in urban areas.

The 100 smart cities initiative of the Government is aimed at enabling this urbanization to happen in a sustainable and planned manner. However, along

Head - Supply Chain (India Sub continent), Ferrero India

with urbanization, there would be a significant change in the food plate composition. The demand for high protein foods such as fruits, dairy products, fish, etc., will increase. This means that there will be an increasing requirement of high value foods, retail chains, food parks, etc.

To meet this demand, we will need to have a supply chain infrastructure, which will seamlessly connect the farm to the fork and this will mean having pack houses at the farm, cold storages, collection centers, food parks, food processing centers, juice manufacturing plants, dairy and dairy processing plants, reefer trucks spread across the length and breadth of this sub-continent.

This infrastructure is not going to be built over night in 2030 and looking at this requirement both from a demand and supply side today, substantiates why India has a great potential for investment through structured cold chain implementation from harvest to retail.

“View the entire chain from supplier’s supplier to end consumer as a seamless chain requiring 100% product integrity and safety; worldclass infrastructure and operational best practices; developing right expectations and mindset in service providers; tight SLAs and performance measures for service providers, etc., are all the ingredients towards bettering the performance of cold chain,” asserts Jain. For Singh, maintaining an endto-end visibility of the entire supply chain is paramount to ensure quality is maintained. This can be achieved by

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following 3 simple steps: Identifying problems in the initial stages; build processes to contain problems; and being proactive while responding to problems which have been flagged, in order to ensure it’s contained without causing damage to the product.

Offering real-time insights on the aspects that need attention from the industry and government alike, Mohanta says that the cold-chain business is highly technical. Unlike road transportation, it needs skilled & trained people for operation & execution, as errors or malfunctioning has a very high cost. So, people capability development is a must. Standard Operating Process (SOPs) at every stage needs to be followed. Appropriate technology needs to be selected for specific products & these need to be upgraded continually to bring in efficiency & reduce cost.

Once if for any reason, the cold chain integrity is broken, it cannot be reversed to original form. Hence there is a need to be extra vigilant. Government, on the other hand, has to formulate & monitor for food safety standards and also specify ways to achieve these standards.

Least it would be like looking for carbide free ripened mangoes without having the basic ripening infrastructure.

Sen points out that the use of IoT for remote temperature and location monitoring coupled with advance telematics for control over refrigerated systems and vehicle health tracking helps in keeping a constant eye on the entire supply chain. Defining standard operating procedures, as per internationally accepted standards,

also help in being prepared for any operational exigencies that may impact the quality of goods / service. Chandra elaborates that setting up pre-cooling facilities at production sites, employing reefer vans, mobile cooling units as well as value addition centers, which include infrastructural facilities for preservation and processing will be a key element to ensuring quality throughout the value chain. “While this infrastructure is being set up, it is important that the skills required for handling of the produce, maintaining the right temperature/humidity, etc., is imparted across the value chain. Further, the protocols required for maintaining the right quality is different for different products. This is also dependent on the climatic zones. Hence, it is of prime importance that the protocols for each produce be developed and disseminated to all stakeholders concerned,” he adds.

For products such as fish, grapes and few other limited commodities which are exported, quality standards and protocols exist. For the others, we need to define the same. By developing these and raising awareness, we can ensure quality throughout the value chain, as technology is also now readily available to monitor the same.“Innovative and sustainable solutions to support the cold chain requirements of tomorrow’s India is what we are focusing on today, to help India attain its vision for being the food factory of the world,” concludes Chandra.

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PLAYING CATCH UP “Selection of right supply chain partner and measuring, monitoring quality parameters periodically are effective way of ensuring quality in supply chain.

Quality issues can surface at any point in the supply chain. It is imperative to catch quality issues as early as possible. The costs of unresolved quality issues can be devastating if they are discovered in the latter stage particularly cold storage of perishables,” asserts Somnath Chatterjee, Head – Procurement & Logistics, ITC Ltd (Foods Division), during an exclusive interaction…

How has been the performance of the cold chain industry in the recent times?

The cold chain industry is developing at a faster pace in India due to a shift in focus from increasing the production to better storage and transportation facility of the commodity. The industry has now become an integral part of the supply chain industry comprising of refrigerated storage and refrigerated transportation.

The cold storage infrastructure has the ability to maintain the shelf life of perishable goods by maintaining proper temperature of the products from the farm gate to the end-consumer. Owing to the rising need of the infrastructure to reduce wastage, the cold chain industry in India is forecasted to grow at a CAGR of 19% during the period of 2017-2022.

What are the challenges while operating amid the myriad complexities?

The cold chain industry is unorganized in nature. With around 3500 companies operating currently, the cold chain supply base only comprises 8-10% of organized players. About three-fourths of the 30-million-ton capacity is used to store only potatoes and onions and same is in the state of Utter Pradesh, Punjab, Gujarat and West Bengal.

Further, a third of the cold stores are small, with capacities below a thousand ton each, and are largely in the hands of the unorganized sector.

The current capacity allows only 11% of the total produce to be stored. The lack of ‘ripening chambers’ and pack houses leads to wastage of fruit & vegetables. These chambers are required where fruits could be ripened safely

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and scientifically. The pack houses are required close to farmlands where the produce could be brought, cleaned, graded and stored in cold rooms for a few days until they are dispatched to the markets. The country needs about 60,000 pack houses close to the farmlands.

How can companies optimize end-to-end supply chain planning?

Optimized planning is a key factor for company’s success in end-to-end supply chain. The following methods will

Improve supplier performance: Success begins with supplier performance.

They must deliver quality items and do it complete, accurate and on time.

Collaboration is important.

Compress cycle time: Cycle time runs from the time the need for a productnow or replenished-is determined and goes until it is delivered to the customer or to the store.

Maximize inventory yield: There is a window of opportunity to get the maximum price, the maximum, yield for products.

How can technology help in enhancing the expanse?

The use of technology is the cornerstone of any successful business in the 21st century including cold storage industry. Many companies are moving from traditional cold storage build models to more up-to-date and aesthetically pleasing modern operation models, making it critical to create cold storage units capable of fulfilling this demand.

Indian companies introduced latest technology called ‘Black Box’ technology, which ensures the preservation of any agricultural commodity for 1,000 days. Black Box is a unique technology developed by scientists in Spain. It can be easily set up in any factory or plant.

Regular cold storage utilizes nitrogen.

However, in the Black Box system, there will be neither nitrogen nor any preservative. The stored commodities will have their natural content and nutrition value intact for 1,000 days.

The technology helps farmers to increase their returns and reduce wastage of fruits and vegetables.

Statewise capacity of cold storages in India

Implement lean logistics / supply chain management: Lean logistics complements supply chain management. Both emphasize pulling, not pushing, products through the supply chain.

help companies optimize end-to-end supply chain planning: » Improving demand planning and forecasting by integrating point-ofsale data and actively influencing demand (revenue management/ demand shaping) » Linking the push and pull principles as part of LEAN Planning & Scheduling » Maintain healthy supplier relationships » Source suppliers strategically and with collaboration » Move contract management responsibility to the supply chain » Optimize inventory for reduced cost » Establish regular reviews to ensure efficiency and mitigate risk » Be socially responsible and establish ‘green’ initiatives.

What are the global best practices that the country needs to imbibe?

Increase inventory velocity: Inventory must move quickly; turns should be high. It must flow from suppliers or manufacturing sites to customers.

Utilize meaningful metrics: There are numerous measures for companies and their supply chains. Many are measures for the sake of metrics with little meaning to C-level executives or with little value in really measuring supply chain performance. Meaningful metrics are orders delivered complete, accurate and on time and time related-such as days of inventory on hand, cycle time and others.

Segment the supply chain: Too many firms have one supply chain approach for everything. This monolithic approach handicaps performance, diverts resources, and creates static noise from external and internal sources that distracts the supply chain organization.

Employ supply chain technology: Supply chain execution technology is important to managing a global supply chain. It should provide visibility throughout the entire supply chain.

Type of Infrastructure

Infrastructure Requirement (A)

The cold storage infrastructure has the ability to maintain the shelf life of perishable goods by maintaining proper temperature of the products from the farm gate to the end-consumer. Owing to the rising need of the infrastructure to reduce wastage, the cold chain industry in India is forecasted to grow at a CAGR of 19% during the period of 2017-2022.

What crucial role does the 3PL provider play in the whole value chain?

Outsourcing supply chain services to third party logistics providers gives businesses the ability to focus on primary functions that are Infrastructure created (B)

All India Gap (A-B)

Pack-house

70,080 nos.

249 nos.

69,831 nos.

Cold Storage (Bulk)

34,164,411 MT

31,823,700 MT

32,76,962 MT

Cold Storage (Hub)

9,36,251 MT

Reefer Vehicles

61826 nos.

9000 nos.

52826 nos.

Ripening Chamber

9131 nos.

812 nos.

8319 nos.

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core to their operations. Forming these business partnerships allows retailers and manufacturers to more easily expand operations while increasing efficiency and reducing costs.

What are your expectations from service providers?

Accuracy of managing stocks, batch management, maintaining FIFO/ FMFO, intactness of managing product temperature, power back-up, maintaining hygiene condition of the cold store, on-time despatches are some of the key expectations from service providers.

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ADVERTORIAL

Indian companies introduced latest technology called ‘Black Box’ technology, which ensures the preservation of any agricultural commodity for 1,000 days. Black Box is a unique technology developed by scientists in Spain. It can be easily set up in any factory or plant.

Regular cold storage utilizes nitrogen. However, in the Black Box system, there will be neither nitrogen nor any preservative. The stored commodities will have their natural content and nutrition value intact for 1,000 days. The technology helps farmers to increase their returns and reduce wastage of fruits and vegetables.

What’s your take on in-transit goods that require ambient temperature?

Following key points should be taken into consideration: » Proper use of tarpaulins and covers to ensure safety of stocks in-transit » Insurance cover should be taken to avoid possible losses from unforeseen situations » Proper stacking of cargo in the vehicle and avoiding dumping it with other material will help avoid in-transit damage to cargo » Food grade cargos should not be mixed with hazardous material or any other material, which will either contaminate of damage the food product.

What are the government initiatives needed to better the cold chain infrastructure?

The government has developed various schemes to push cold storages and warehousing in India through forms of tax exemptions, subsidies and an instrument called the Negotiable Warehousing Receipt (NWR). Subsidies if available should be directed to the right hands. There are few trade barriers and their effects on the industry as follows: There are certain policies adopted by the Government like APMC, Essential Commodities Act (which have an indirect effect on the industry) that have been creating supply chain distortions and trade restrictions of fruits and vegetables. These have caused major impacts on the food sector and have an adverse effect on the cold chain industry. APMCs need to be

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replaced with an open and competitive market system, which should replace intermediaries and agents who currently control the mandis or markets.

Entrepreneurs, who want to conduct business in cold storage, have to endure a host of regulatory barriers, which thwart the growth of the sector.

Cold chain sector needs to be boosted through effective strategies and policies involving private players.

The development of road, port, rail and air infrastructure corresponds to the need of streamlining and strengthening the supply chain.

The e-commerce warehousing model has shown the way forward with tie-ups and aggregated usage of spaces for products.

The landholding and ceiling requirements should be liberalized for cold storages, as it shall facilitate the effective utilisation of commodities.

Regulations should give way for an open and transparent system that can substitute subsidies. Subsidies distort market and hence need to be replaced through incentives and ease of entry, operation and exit. Subsidies are tied to vested interests, and hence benefit only few parties, which antinomies the government’s role in the food and agricultural sector of the country.

The above barriers have to be addressed appropriately to better cold storage infrastructure in the country.

What are the ways to ensure quality throughout the value chain?

Selection of right supply chain partner and measuring, monitoring quality

parameters periodically are effective way of ensuring quality in supply chain.

Quality issues can surface at any point in the supply chain. It is imperative to catch quality issues as early as possible in the supply chain. The costs of unresolved quality issues can be devastating if they are discovered in the latter stage particularly cold storage of perishables. Therefore, it is critical to identify quality issues early in the supply chain to manage quality related costs and risk. These can be achieved by keeping a clear focus on establishing clear measurement programmes on quality; on-time delivery; service; price; total cost; contract compliance; responsiveness; and finally ensuring that supply chain partners understand issues and resolution requirements in a timely manner.

Somnath Chatterjee has over 23 years of rich experience in handling key positions in food industry / FMCG giants like Nestle.

He specializes in commodities procurement and strategic planning with focus on implementing cost reduction measures. He has vast experience in logistics, warehouse management, distribution, transportation, production planning and inventory management. Somnath has done his postgraduation in humanities with specialization in tea and coffee tasting from J. Thomas & Co, Kolkata and Thompson Lloyd & Ewart of London.

INTEGRATED COLD CHAIN NETWORK “A focused approach, use of technology and integrated network is driving us forward”, asserts Mr. Jasjit Sethi, CEO- TCI Supply Chain Solutions. growing demand of this sector, without compromising on the quality of the products serviced.

Currently, cold chain services are mainly being used only for important products like medicines, vaccines etc., as temperature adherence for these products is of utmost necessity.

Although, there is a very high scope for cold chain services for food sectors in the Indian market, gaps in service availed exist due to lack of proper knowledge & infrastructure for end to end cold chain services. Immediate attention from the government & industry is necessary especially in food sector including fruits & vegetables, processed food, poultry, flowers, etc.

Continuous innovation & improvement is the true sense of success & customer satisfaction. At TCI innovation is deeply ingrained in the system. At TCI Cold Chain Services, we have introduced the concept of “Double Driver”, to achieve timely delivery of products. With the implementation of this concept, we have been able to reduce transit time to a great extent & delivery is being done before target date. We operate a National Operations Center, with remote access through which centralized control is being executed over our pan India cold chain operations. Apart from this we have installed RH controller in our reefer warehouse for maintaining the relative humidity of life sciences & healthcare products between 35-65% RH.

How is technology helping you reach the goal?

What are the green initiatives taken by you?

At TCI, we believe in entwining a process with technology to get a consistent, efficient and best quality solution. A three-layer control through technology is being operated at TCI Cold Chain services. a. GPS: Each reefer vehicle is equipped with GPS ensuring continuous monitoring of the temperature, and real time tracking as a result of which it helps us to maintain the quality of the temperature sensitive products without any compromise. b. Data Logger: Our state of the art reefer vehicles are equipped with imported data loggers through which we can monitor & store data at high resolution. c. Usage of Thermometer: For maintaining control over the quality of products, temperature is recorded at the time of loading & then deviation is checked by re-recording the temperature at the time of unloading.

We have deployed CNG vehicles in few major routes for secondary delivery.

Solar panels are used at our cold chain warehouse for generating electricity.

We are using ammonia as a refrigerant in our warehouse which possess a zero potential of ozone depletion & global warming and is considered as safe from environmental protection point of view.

What are the sectors that demand an immediate attention from the government and industry alike?

How do you plan to bridge the existing gaps in cold chain?

With its capital-intensive equipment, strict temperature adherence & dependence on energy, the cold chain has always been a very demanding logistics segment. This sector is now grappling with additional challenges: from increases in sensitivity & quality standard to continually mounting regulations. With the increased volume due to economic growth, there is a very high requirement of cold chain services in the Indian market, but level of cold chain services availed by the service seekers is very low. This gap exists due to various reasons: firstly, due to the mindset of service seekers that cold chain service is very costly. So, the service seekers prefer to produce & sell their products locally. Secondly, there is a lack of end to end integrated supply chain in the cold chain industry.

Quality is compromised in the supply chain as currently cold chain services are available in pieces, due to which there is breakage in temperature. To bridge these gaps, development of an end to end cold chain solution is the need of the hour. TCI is planning to develop a robust integrated cold chain network in the upcoming years to cater the

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What are the breakthrough innovations done by you in the cold chain space?

What are your strategies in place to take the cold chain growth story ahead?

Cold chain is the future of supply chain. To move the cold chain growth story ahead, we are taking focused approach on each vertical like QSR, pharmaceuticals, poultry, processed food, F&V. We are planning on developing an end to end integrated cold chain network in the upcoming years to cater the growing demand of this sector, without compromising on the quality of the products serviced.

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It’s a Deal As commercial deals assume significant impact to the business success, value in terms of money, longevity and legal obligations of an organization, one must steer through the negotiations with an end objective of ‘mutually profitable & dispute free association’ until the end of contractual relationship. Through this piece, Vijendar Rao, Chief – Procurement & Supply Chain, HSIL Ltd., elaborates on the importance of effective negotiations in closing a business deal and steps to reach the objective, especially in commercial perspective.

N

egotiation is a skillful combination of art & science.

While one continues to learn mastering the nuances over a period of time, scientific methods can help better the success rate. Here are few key points, one should be mindful of before engaging into a negotiation; PREPARATION: Remember that 80% of negotiation is just preparation and 20% is discussions. More you are prepared in complete details of the deal, psychology of people participating in the discussions, both sides expectations, facts & figures, flash points in negotiation, etc., better are the chances of succeeding. One must be convinced that enough research has been done before engaging into the negotiations.

BIG PICTURE: Begin the discussions with a big picture in mind first and gradually move towards specifics of the contract. At the beginning of negotiations, both sides necessarily should be clear on the overall scope of deal, outcomes, boundaries and exclusions / inclusions of the contract.

Typically, negotiations can take several rounds. As discussions move forward, the consensus must taper down from a bigger picture of scope towards specific aspects of contract.

RELATIONSHIP: Maintaining cordial relationships with fellow negotiators throughout the discussions is another important element. During this stage, one needs to be conscious of the body

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language, vocabulary & even facial expressions and should be aware of its effect on other side negotiators. Keep a close check on how treatment to each other is being meted and ensure that at no point of time relationship is affected.

Best negotiator is the one who not only maintains conducive atmosphere throughout but also uses these negotiations as a platform to nurture strong interpersonal relationships.

DECISION MAKING: Do not rush for the decisions during discussion stage itself. The major decisions need to be always internally debated, vetted by stakeholders and communicated formally later. However, the negotiations can be brought to a level so that a clear stage is set for decision making.

Going overboard and committing on the spot may sometimes go awry and lead to retractions. Going back on a commitment made or agreement reached is the most dreaded thing to happen and one must always avoid.

Such withdrawals of decisions would spoil future negotiations or at times relationships between organisations too.

PRECEDENCE: Sometimes, the decisions taken in one negotiation tend to form a basis for future negotiation/s. One should be cognizant while taking such influencing decisions in order to not impact future negotiations. Else future negotiations may start off as if earlier decisions are considered as applicable to ongoing negotiations as well. In fact, while this may work favorably to one

party, other side will face difficulties or may have to pay price for this precedence.

Considerations to be made before negotiation Utmost clarity is required on the outcomes that need to be achieved by the end of the process and what is the allowable band of acceptance for these outcomes during the course of negotiations. One needs to be clear which outcomes if not achieved would jeopardize the whole contract and hence register them in mind as ‘non-negotiables’. Other consideration on softer aspect is – who are the negotiating members from the other side and their hierarchy or decisionmaking power in their respective organisations. Also,one must know exactly which kind of aspects are decided by whom. For example, if it’s a negotiation of price or price structure,

SHUTTERSTOCK

FOCUS the sales team typically operates in certain band given to them by the management. One aspect is to push them towards lower band but also negotiating better terms on warranty period or installation/service costs, etc., which do not jeopardize the other party’s interests but will help us to maximize the gains even if desired price is not achieved. The other aspect is to take the negotiations to higher levels so that right decision makers are roped in (this depends on the value / size of negotiation and how big & important the contract is perceived as by the other party).

Challenges in the way of successful contract Some of the challenges that come in the way of a successful contract are either failing to convert every aspect that is agreed into a relevant clause or sometimes even failing to anticipate what can go wrong / right during subsequent years of operations (and converting that into relevant clause/s). For example, let’s say the supplier comes up with an innovative idea during first year of operations and implements that during the second year to reduce his / her costs but does not want to pass cost benefits to you.

You cannot hold them against it unless such developments are anticipated even before the contract is signed off and are incorporated into the contract as a clause. In much advanced contracts (typically transformation projects), such developments are anticipated in advance and clauses are incorporated to define even who would have the ownership of IP rights of such improvements. If such smart thinking is missing at the beginning, such developments shall turn into disputes at a later stage and evaporate the essence of cordial relationships.

Organizations can address such situations by keeping a provision of periodic revisions of certain specific set of clauses. While this may alleviate to an extent but cannot guarantee that revisions can be forced upon. Other way of dealing with challenges that are encountered during the service period is to have regular ‘Contract Governance’ reviews. These governance meetings would bring out any issue well in time so that surprises are not sprung in the end moment. These

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governance meetings are held to review performance on ‘both sides’ and support required for smooth, successful execution and draw out mitigation plans. There is a possibility that contracted supplier is unable to perform to contracted service levels due to delayed payments by the client organization or certain necessary support missing from IT organizations such as IBM, Infosys, Wipro, etc.

Importance of price indexing before contract negotiation Clauses on Price indexing are incorporated into a contract to address the fluctuations in input costs such as raw material costs, fuel, minimum wages, forex, etc. This is more a demand from service provider so that costs are always aligned to prevailing market situations, however it is also very useful for contracting party as well in case of any down slide. For example, if security services are negotiated and it involves manpower deployment in various states, contract should provide for compensating manpower cost increases due to upward revision of minimum wages. Also, if price is indexed at certain price point of Steel as RM or US Dollar, it will benefit the client in case of any downward trend (beyond certain agreed band).

a contractual relationship undergoes governance by both parties to review the performance, payments, bottlenecks and for dispute resolution. A structured governance calendar is developed with clear hierarchy of executives responsible for monitoring the relation as well as decision making in dispute resolution.

Even a well-developed contract is also not perfect in first instance and improvements are continuous. Teams learn from things gone right and gone wrong during execution / delivery and revisit the contract in case changes need to be incorporated. A commercial manager keeps perfecting his / her strategies for negotiation and enriching relevant knowledge of various clauses based on these continuous learnings and would make efforts to build robust contracts.

Vijendar is an astute procurement & supply chain professional with over 20 years’ experience in managing large scale negotiations and strategic partnerships in leadership roles. He is driven by passion to achieve success and focuses on bringing in innovation into challenges faced in this domain. His career spans across industries such as automotive, telecom and consumer goods. He holds a master’s degree in engineering from VJTI, Mumbai and an MBA from IMT.

Contract governance A well drafted and negotiated contract is never complete until the end of contractual term. During this period,

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HI-TECH IN THE BEAUTY BUSINESS

further consolidation. Last but definitely one of the most important ones, we have a very strong aligned view in the organization in ensuring consumer facing quality and regulatory compliance and this is one of the strongest enablers, which supply chain brings to the table.

“In today’s VUCA world, adaptive agile response ability is critical. Nothing is cast in stone except the concept of ‘Consumer first’. Hence supply chain models need to be flexible yet efficient, bimodal supply chain response is now a necessity,” asserts Arjun Varma, Supply Chain Director, Nivea India, in an exclusive interview…

Pls inform us about one of the most challenging projects managed by you at Nivea.

How is the FMCG space shaping up in the country? Moreover, the advent of new players in the market is also creating lot of waves for already established players. What are your views on the same?

FMCG space is generally a reflection of a country’s economic health. The Indian FMCG space continues to be an exciting place to be in, as for both global and Indian MNCs, it is one of the relatively high growth markets in the world. With the ever-increasing number of players in the market, brand strength and product quality & efficacy are playing an increasing role in breaking through the clutter and getting into and remaining in the choice basket of the consumer.

New players will come in, but strong brands and products will continue to have loyal consumers.

How can supply chain play a crucial role in retaining the prime position in such stiff competitive environ?

From a supply chain perspective, consumers are accessing the product through multiple channels, hence ensuring availability and access in all the relevant channels is a critical enabler. Response agility & resilience in the supply chain has never been more important. Innovation relevance, differentiation, quality & execution speed is another way in which supply chain acts as a business enabler visà-vis competitive forces. Ensuring a sustainable and environment friendly supply chain is also fast becoming an essential element rather than good to

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have, government is also legislating quickly towards ensuring same.

What are the complexities involved in managing supply chains?

In today’s times, compliance to fast evolving regulations and agile response to macro-economic environment changes like demonetization, GST implementation, etc., has become critical to business continuance and success. Additionally, in today’s VUCA world, adaptive agile response ability is critical. Nothing is cast in stone except the concept of ‘Consumer first’.

Hence supply chain models need to be flexible yet efficient, bimodal supply chain response is now a necessity.

Digitalization is a big enabler, however in the short term it lends itself to a lot of uncertainty as technologies are fast evolving and one needs to take a punt on the right technologies to power supply chain. Developing people capabilities and infusing new capabilities to adapt to digital first ways of working is another area needing constant high focus.

What are the USPs of your company’s supply chain? Kindly share with us some of the innovations done in this space?

Nivea products stand for the highest quality and cutting-edge product technology and efficacy. To maintain this, our glocal supply chain model ensures response agility while ensuring core product ingredients quality and efficacy are never compromised. We also have one of the faster innovation

models in the personal care space vs competition delivering local market relevant innovations. Our innovation success rate is also one of the highest in the industry. We also have some of the best service levels in India amongst all FMCG players basis reports from our organized trade customers.

Nivea India supply chain has undergone transformation journey in 2013—14 towards becoming an enabler for the business through a combination of supply chain re-organization and capability introduction & sustained development, evolution of its operating processes and technology enablement of the entire supply chain. Today, India supply chain is recognized as one of the better supply chains worldwide within the organization and also from a service level standpoint by our Modern Trade customers. Nivea India has become one of the fastest growing FMCG organizations in the country having grown nearly 4 times in last 5 years, it felt like changing the tires of a fast running car. However, the team really rose to the occasion and today we have

an outstanding supply chain team of passionate people who are powering ahead every year.

Pls tell us about the packaging innovations done at Nivea.

What crucial importance does packaging hold?

How do you ensure speed to market so that it reaches on shelves on time on demand?

Packaging is a critical differentiator for the customer in all the so called three moments of truth. Nivea has globally been always recognized for its differentiated packaging. To take one example, the iconic Nivea blue tin has been a timeless example of packaging excellence & quality and is recognized and cherished the world over by our consumers for its simplicity, elegance and functionality.

Value chain agility has many facets, what is relevant is how are we listening to and responsive to customer needs.

While we have linear working operating models, what is also important today is to listen to formal and informal feedback loops and also use technology to provide timely demand visibility and drive supply chain response acceleration.

As an example, about a year back, we have implemented a replenishmentbased response model linking inventory at the depots to production plans at our production centres, both in India and globally.

Share with us your journey towards sustainable initiatives in supply chain.

Globally, Beiersdorf, our parent company has taken many steps towards ensuring a sustainable and circular supply chain.

The combination of functional excellence, passion, perseverance, adaptability and curiosity through the years will hold fresh graduates as well as supply chain managers in good stead towards delivering excellence.

What are the factors that make or mar your supply chain?

Specific to our India supply chain, buoyed by the ‘Make in India’ program of the government, we have localized majority of our production into India with the commencement of our production centre in India couple of years back supplemented by contract manufacturing units. This gives us some level of cost competitiveness and more importantly response agility to India market requirements. We have a robust operating S&OP process delivering some of the highest forecast accuracies in the industry. We have also seen working capital optimization by more than 80% from 2013 levels reflecting a more optimized supply chain model.

Our warehouse distribution model was sufficiently optimized for the India environment and GST now enables

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21

INTERVIEW the warehousing land space, multiple global 3PLs are investing in a big way in scale warehousing hubs, transportation is seeing innovative models like relay model pioneered by Rivigo becoming a reality, IOTs and robotics starting to be used in an extensive way in manufacturing, etc. A lot of visions and hopes of supply chain professionals will now see the light of the day in coming years. However, supply chain structures within organizations will also evolve and supply chains of tomorrow will be structured around a core within the organization and rest through strong interlinked partner and freelance ecosystems enabled by platforms of choice. We will need to learn to work in such a structure.

In India too, we have taken many steps, one example being we are, for the past few years, already zero waste to landfill and our production & distribution waste are all completely recycled or converted to energy.

How different & difficult the Indian market is when it comes to managing supply chains?

The Indian market is quite different vs many other developed countries. While we have a larger number of consumers, they are spread out and individual purchasing power is low. Consequently, there is retail fragmentation vs consolidated large retail outside in many places. Hence supply chains have to handle more complexity, for eg. our warehouse architecture of tens of warehouses is in stark contrast to countries outside which have a couple of large warehouses servicing the entire country. Likewise, there are many other differences. There are multiple positives too, one key e.g. at the officer and managerial level, there is a good measure of high quality supply chain talent available in the country at reasonable cost vs outside.

You have been a part of supply chain domain for close to two decades. What striking transformations have you witnessed over the years?

There is more understanding and respect of what supply chain brings to the table today. Supply chain today has a seat at the management table in most evolved organizations including Nivea and this is growing. This, to my

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mind, is fundamental to the evolution of the function and sophistication as it will lead to more talent wanting to make a career in this area. Supply chain technology is also finally maturing, whether in factories through IOTs or in customer service, logistics & procurement space, in this age of digitalization, supply chain is slowly but surely getting recognized as a powerful competitive force for the organization.

How is technology being an enabler in enhancing supply chain networks?

Supply chain and technology go hand in hand. Technology is what provides supply chain with the life force to deliver continuous improvements and efficiencies. The good part is we are undergoing the advent of the new machine age with the maturation of next gen communication, energy and mobility technologies. All of these three lend themselves to transformative supply chain improvements in visibility, efficiency and sustainability. It will take relatively more time in India, but it is all happening and the pace of change in the world is mind boggling to say the least. The timely adoption of the right technologies will become a key competitive differentiator.

How do you foresee the sector dynamics shaping up in the near future?

I see a lot of positive changes already underway in the supply chain sector.

With GST becoming a reality, it is a game changer for the industry. A lot of professional players are entering into

How can fresh graduates and supply chain managers keep their enthusiasm intact to deliver the desired results?

What’s your advice to them?

The combination of functional excellence, passion, perseverance, adaptability and curiosity through the years will hold fresh graduates as well as supply chain managers in good stead towards delivering excellence. They will now also need to combine this with digital literacy to take sufficient advantage of technology, which will be essential and second nature in coming years. Gaining experience across supply chain functions along with having a strong hip pocket skill, people agility & leadership will continue to be important to grow into higher roles. They should continue to invest into the same for continued success.

Arjun Varma is an FMCG & Retail professional having around 18 years of leadership experience in end-to-end supply chain management, sales & distribution, P&L management, business development, quality and regulatory compliance affairs management. He has got an extensive exposure to the India subcontinent market across FMCG, Healthcare Nutrition, Retail & Petrochemicals. He has worked with Pepsico, GlaxoSmithKline Consumer & Aditya Birla Retail in the past. Currently, he is looking after extended supply chain for India, Bangladesh, Nepal, Srilanka & Bhutan for Nivea India (affiliate of Beiersdorf). Arjun has been felicitated by SAP Digitalist as one of the Top 25 Digital Thought Leaders in India, 2015.

INTERVIEW

THE PERFECT CONCOCTION “Most of the times, you don’t need to lead the owners in your team, you just need to facilitate, keep a safe distance and provide them neutral view from a distance off the field that they may not be able to see in the field. Sometimes it’s also not a bad idea to follow young owners in your team if they have right expertise,” believes Anil Tomar, Director – Operations, Danone India. This interview reflects upon Ownership and Expertise as the driving factors for success. Excerpts…

How do you view supply chain in VUCA world?How can companies deal in such trying times?

This complex and fast changing environment brings new challenges to supply chain teams every day and to survive in this VUCA environment, supply chain teams need to be creative and proactive at the same time.

Investing in people, processes as well as technology in a rightly manner could be used as a prime key to success by supply chain organizations.

In VUCA world, strategic forecast accuracy is extremely important to strike the right balance of capacity/ capability and cost. In supply chain, especially manufacturing, it takes time to build capacity/capability and it comes at very high cost. If forecast is less than demand, we lose business opportunity and market share but if forecast is more than demand, we have idle capacity/ capability and hence higher absorption cost and lesser money to invest in business to grow. Use of advance digital tools and analytics can help supply chain teams to make better strategic decisions.

To be successful in VUCA environment, companies can adopt bimodal supply chain management; the practice of managing two separate but coherent styles of work: one focused on predictability; the other on exploration.

One helps you build reliability in present and the other helps you get competitive advantage.

Kindly elaborate on 3Ps to drive

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organizational growth The 3Ps; People, Process and Productivity are very important for the organizational growth. But with this, there should be a 4th element to make it complete. I would like to rechristen it as 3PR; People, Process, Productivity & Reliability and I believe that this combination is what is required to make an exceptional organization and supply chain. Exceptionally talented people build strong and efficient Processes, strong Processes lead to Productivity and Reliability. People and Process are the investments; Productivity and Reliability is the result but it all starts with the People.

You have emphasized a lot on ownership & expertise at so many conferences. Can you please help us understand more about it?

To me, operations excellence is consistently delivering high performance and sustainable results, challenging the status quo, raising the bar within organization and across industry. In an organization’s journey to operational excellence, strong supply chains can be a competitive advantage.

Ownership & Expertise; I discovered these two magical words couple of years back and since then, these two words have dominated my thoughts, both in professional and personal life. Success or failure, almost in every situation, I could relate to ‘presence’ or ‘absence’ of Ownership & Expertise.

The more I demonstrated Ownership

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I would like to quote from an article

by Joel Basgall. He says ownership isn’t assigned or given. Ownership is taken.

I can’t appoint ownership. It happens when an employee comes forward and says, “I’m going to make this happen.

Here’s what I will do. Here’s what I will accomplish. And here’s how I will measure progress.” Ownership means saying, “You will” is unnecessary because the employee has already said, “I will.” Owners within organization can also be identified with “No excuse mentality”, “100% result orientation”, very high degree of proactiveness and they mostly focus on “circle of influence” and not “circle of concern”.

Most of the times, we don’t need to

EMPOWER & PROMOTE

Clear KPIs Performance linked comp Regular Reviews, Regular Follow up

2.5% Innovators

04

01

03

02

LET THEM GO & Grow in their areas of passion

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INVEST & GROW Encourage, Coach & Support Follow Situational Leadership at different stage of development

High OWNERSHIP

lead the owners in our teams, we just need to facilitate, keep a safe distance and provide them neutral view from a distance off the field that they may not be able to see in the field. Sometimes it’s also not a bad idea to follow young owners in your team if they have right expertise. Worst thing you can do with owners is spoon-feeding them, overprotecting them or micromanage them and not letting them experiment, learn from failures and build their own

Young professionals should consider building career in supply chain only if they are passionate about supply chain. Please don’t chose supply chain only because it helps you get a job easily.

In order to find your area of passion, if you want to try different aspect of supply chain, please go ahead but make sure you make your choices faster and even if you are experimenting make sure you apply your unique strengths and passions into your job and deliver ROI for the employer.

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Suffering due to the change?

MANAGE

success stories. If hiring new people for your team, look out for people with ownership mindset.

What are the disruptive technologies that are shaping the future of supply chain?

Technology disruption is everywhere and it’s happening faster than ever. Some companies are leading this change, some getting benefited through early adoption and majority of them are confused about the development and use of technology. This confusion, many times, lead to decision paralysis related to critical technology and sometimes it leads to extinction of companies.

There is a sudden increase in the innovations related to robotics, sensors and predictive analytics. While all this is happening around us, each company must fight its own battle related to development and adoption of technology. Decision making is not easy, but consequences are serious.

Study and inspiration from theory of law of diffusion of innovation can help. When it comes to technology evolution, customer is always happy.

However, this may not be true for all the companies especially if customer is happy about the technologically advance

www.freepik.com

How can companies build on Ownership and Expertise?

Leading the change?

EXPERTISE

for job, situation or people, the more success I achieved and whenever I didn't, it led to failures. And then I owned these failures and it turned out to be stepping stones for greater successes. If I took ownership of something, I ensured either I had the required expertise, or I brought it from internal or external sources.

If we as leaders could make correct assessments and guide our teams to right experts at the right time, many heartbreaks can be averted. I think, if senior leaders have absolute sense of ownership of success for the project and the people leading it, they will not take chance by advising in the areas where they lack expertise but would rather encourage teams to either build expertise or seek/hire right experts.

INTERVIEW

High

INTERVIEW

Early adopters 13.5%

Early Majority 34%

Late Majority 34%

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3

4

product by their competitor. Companies or individuals on the left-hand side are the one that are either leading a change or enjoying the benefits of technological advancement and companies or individuals on the right-hand side are always the one which are not able to catch up and hence suffering.

Companies that are technology providers do not have a choice but to be always in first 2.5%. Others need to be early adopters, early majority and in exceptional circumstances late adopters.

Whether to be in II, III or IV box, it all depends on ROI. ROI has to be seen in much broader terms and not just short term. One needs to be creative and forward looking while applying ROI concept in terms of technology investment and need to have right level of Ownership & Expertise.

What have been the most challenging days in your life?

I can recall two most challenging phases in my professional life. One when I was empowered to do what I loved the most even if I didn’t have expertise. It was my first leadership role. Initially I was cautious but then I didn’t realize when confidence grew up into overconfidence.

I kept experimenting and kept getting success until we reached a point when I wanted to change almost everything overnight without expertise and I failed miserably. Good or bad part, organization still trusted me and asked me to continue and that meant I had to work day and night to clear the mess.

But the remaining period in that role after this tough phase was one of the most beautiful phase of my professional career and leadership journey as I learnt to balance Productivity with Reliability

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Laggards 16%

5

and learnt the value of expertise hard way.

Second most challenging phase was when I decided to do something that I was not really sure but gave me big money and almost everyone around me was in the same boat. There was a massive support group of very senior and experienced people. They were all nice and intelligent but none of them had specific expertise in the areas that we were working on. Worst part, I let my seniors take ownership of choosing and providing the experts and they relied on their seniors and finally the whole Ownership concept was diluted but it all started with me. We continued to deprive for specific technical guidance until suddenly by chance an expert from comparatively lower rank appeared and changed everything for good overnight.

This was my big insight for ‘Ownership & Expertise’.

What would be the message that you would like to convey new age supply chain professionals as well as the young talent that’s waiting to be a part of this growing tribe?

I would suggest young professionals to consider building career in supply chain only if they are passionate about supply chain. Please don’t chose supply chain only because it helps you get a job. In order to find your area of passion, if you want to try different aspect of supply chain, please go ahead but make sure you make your choices faster and even if you are experimenting make sure you apply your unique strengths and passions into your job and deliver RoI for employer.

If you find your passion in supply

chain, work like owners from day one. Please note that you have a big ownership of driving exploration part of bimodal supply chain strategy. Consider it like your own startup, make sure you work harder than anyone else; during day time to learn the tricks of the trade from your experienced colleagues and during night exploring what’s new is being done elsewhere and what new big thing is coming soon. As young professional, you have the best eyes to pick up non-value adding activities and to suggest what needs to be changed.

As young professional, if you are not able to work as owners and not able to play critical role in positive change in your organization, think: either you are not passionate about the job you do and your love for work is elsewhere or you have still not worked on your guts to challenge the status quo and stand alone in the fight for positive change.

In both the cases, make a bold choice sooner the better.

Anil Tomar is a senior operations/supply chain leader with experience in diverse senior leadership roles in operations, supply chain management, manufacturing, procurement & project management with reputed multinational automobile (Honda) and food & beverage (Pepsi, Mars/Wrigley, Kellogg, Danone) companies. In the current role, he leadsoperations/ISC (Integrated Supply Chain) at Danone India for all segments (Baby Nutrition, Adult Nutrition, Dairy) and is responsible for end-to-end operations including procurement/SSD (Sourcing & Supplier Development), supply chain (Planning, Logistics, Warehousing) and manufacturing (2 Own Manufacturing Plants and 5 External Manufacturing Plants). He is a B. Tech Mechanical from Delhi College of Engineering.

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LEADERSHIP

LEADERSHIP

The Modular Way With people in India modernizing and the concept of kitchen evolving, Chimney was a much-needed product. Enter Elica which got into the market with the right product at the right time to strike a perfect balance at a point of time when the European market had saturated and a market like India was still virgin. “We basically tailor the international design to boost functionality. Elica PB manufactures usable and much needed products with the required feature to arrive at the perfect product and price combination. And it is a win-win situation for both the consumers and us,” asserts Pralhad Bhutada, CEO, Elica PB India Pvt Ltd…

What made you venture into electric chimney business way back in 1995?

It was mainly because the concept of modular kitchen started picking up in India. And indisputably anyone who wants to go for a modular kitchen will look at chimneys. To put it straight, the first sign of going modern is by upgrading your lifestyle and chimneys are one of those basic necessities of a modern living.

India has a lot of potential when it comes to kitchen hoods as it was a new trend. Even now not even 1% of the population have chimneys, so one can very well imagine the immense scope the country has

26 CELERITY May - June 2018

to offer to this industry. Also, the European market is saturated as chimneys are common when it comes to kitchen and has been there for years. But it is vice versa in our country. The potential is huge as it has only been 10 years that chimneys have entered the Indian market. For the next ten years, it is certainly going to be one of the fastest growing markets.

It will soon be among top five countries in terms of revenue and contribution. This is a reason good enough to keep the entrepreneurs motivated.

You brought the best in class Italian technology into the

Indian households. How did it struck you and you went ahead with partnership?

With people in India westernizing and concept of kitchen evolving, I knew Chimneys was a muchneeded product. I got into the market with the right product at the right time and was able to strike a perfect balance at a point of time when the European market had saturated and a market like India was still virgin.

Elica SpA brings high end design, technology and boasts of the best kitchen chimney in the world and through a partnership with them we could offer the same within our country. With people upgrading their lifestyle and going in for modular kitchen, my aim was to offer them superior technology but customizing it to Indian needs. We basically tailor the international design to boost functionality. We at Elica PB manufacture usable and much needed product with the required feature to arrive at the perfect product and price combination. And it is a win-win situation for both the consumers and us.

How was the scenario then and how has been the performance so far?

When the trend for chimneys hitting the market, it offered only the normal performance parameters. It did not have noise reduction features, had basic

control features such as push button and normal lights. Now as the concept of kitchen is evolving, so are the chimneys and hoods in India and globally. Kitchen is no longer a closed space. People are going in for open kitchen, which is modular of course. They are looking out for added comfort. Besides, kitchen is also becoming a place to socialize. Kitchen space is no longer only the domain for women, both men and women are playing equal roles.

With kitchen assuming such an important spot in the house, nowadays we get to see kitchens, which are clean and linear and everything goes in the cabinet and today chimneys have taken a front seat. Market is divided into three categories basis the price point.

First is low to mid that is the mass market. Second is mid to high that is the affordable high-end category.

The mid to high range is the most sought-after category and the price bracket is Rs10000/- to Rs15000/. Third is high end covering the premium segment. Elica PB India is the only brand to cover the entire spectrum. Furthermore, we are leading in all the segments too.

Currently we are growing at 40% and have a turnover of 200 crore.

Kindly share with us the changing trends in this space?

When we talk of changing trends, there is a remarkable evolution in the shape, design, control features, lighting and over all aesthetics. The push control has been replaced by touch control; lights have changed to led lights and strip lights. With strip lights, you get to change the colour of the light depending on the ambience. As the market has moved forward, people are looking at chimneys beyond its basic utility.

Silence technology, calvin control, high efficiency and more power are becoming the latest trend and market demand. It is a complete package that is designed to boost the level of comfort for its users.

Even when you are not cooking, there are chimneys with almost no noise, which are at work purifying your kitchen air. They are armed with special sensors. So, this is how

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UP, CLOSE & PERSONAL What’s success according to you?

Business success is purely dependent upon how close you are to your business and understanding the complexities at every level. My major focus has been in understanding the product, the consumer requirements and maintaining the price product ratio. I have been able to ensure that the company delivers a world-class product at an affordable price. Leveraging the creativity of the organization and maintaining close relation with the channel partners has been clearly the biggest strength I have possessed. Keeping things simple and being fundamentally clear is the key. Taking timely decisions with the right logic without being much procedural is important to any business success.

A recent book you have read and has implemented its learnings into the business strategy…

The recent book that I have read is ‘Playing To Win How Strategy Really Works’ by AG Lafley and Roger L Martin. This book takes into account the various strategic choices a manager is faced with in a highly competitive market place. One of the strategies that I apply in my daily working from this book is the low-cost strategy, basically cost leadership. In this competitive landscape, usually companies have to price their products almost similar to each other. However, firm with the lower costs can increase their profit margins and hence invest that extra margin into gaining a competitive advantage in other ways such as marketing or advertising.

What’s your leadership style?

I am not a supporter of the conventional, bureaucratic culture rather, I am more result driven. I believe in infusing a work culture, which follows international corporate standards. Every employee at Elica PB has the independence to work with full creativity and can put forth their independent view point. I believe in a flat organization and not the hierarchy model. My role is that of a team player rather than a typical boss!

Your favourite destination & cuisine…

London cuisine: Indian at Chutney Mary London

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LEADERSHIP

Elica PB India has set up a plant in Pune, Maharashtra. It manufactures 10 lakh pieces of chimney per annum. It holds 14-15% of market share in organized sector and 60% in total market share. Elica PB India boasts of introducing split chimney, touch chimney and silent chimney for the first time in India. far technology has shot up today!

What are the latest technological interventions in this field?

Currently futuristic ‘intelligent home concept’ is trending globally.

For the international market, Elica SpA (the best chimney maker of the world) has come up with ‘SNAP’, which is an electric exhaust system connected to the hood by the wiFi. It basically talks to the chimney. It senses when the air is not pure. It removes the impure air and freshens the air. Therefore, it maintains a balanced air quality in the kitchen. Basically, there are now intelligent chimneys and hobs. The electric cooking hob and chimneys are connected to a sensor. As the hob turns on, the heat will automatically activate the sensor in the chimney. So globally our hoods have become intelligent and are way beyond just their basic functionality. They offer good features, great design and are intelligent. In India, the market is progressing but there is a long way to go hence we at Elica PB India

28 CELERITY May - June 2018

tailor the international design to boost functionality.

What are the USPs of Elica that set you apart from the rest?

We tailor the international design to boost functionality. We are a value for money brand. Elica is positioned as world’s number one chimney brand and our hobs are promoted as brass burner hobs for Indian cooking. We believe in offering quality, functionality and consistently adding innovative features and upgrading technology.

Our product of any range assures you of quality without compromise.

It is only due to the aesthetics that the price is more or less. So, technological edge, lean structure and superior product quality sets us apart from other players. Also, we offer superior technology and design at an achievable price scale.

Moreover, we never have quality issues and we cover the entire spectrum of customers from low to mid, mid to high and premium which no brand does at present. We have something for all!

Enlighten us on your distribution network and how crucial is this link in your entire business proposition?

We are a national brand with a strong pan India presence. At present, we sell through 2000 retail outlets and approximately 60 distributors. We are planning to increase this number by 2030% next year to cater to the demand. Also urban markets are more receptive to the concept of modular kitchens and chimneys are majorly sold in category A Towns. But slowly the consumer requirements are also shifting to the semi urban markets. Category B Towns are the erupting and we will be focusing on them too. Currently Bengaluru, Chennai, Mumbai, Delhi, etc., that is, all the category A towns are important for us but at the same time we have a demand coming in from Category B towns such as Madurai, Coimbatore, Nagpur, Kolhapur, Mangalore, etc.

Hence, we cannot undermine their importance. Therefore, this link in our entire business proposition is very significant.

Kindly share with us some of the manufacturing innovations done by you?

We have launched Split Chimneys, Elica Deep Silence (EDS3) and this year we will be launching one more version of EDS3, which will be a more affordable variant.

Furthermore, we are also planning to get newer series such as hoods vertical. Elica will also be exhibiting a new technology in Italy before April. We are planning on getting that too in India very soon.

Basically, every year the brand has two to three technological innovations to offer and which Elica SpA in turn transfers to India.

What are your expansion plans in place?

Elica PB India is continuously investing in strengthening its distribution and retailing set up. It intends to grow its network by 4050% in next 2 years. The brand is also looking at setting up company owned around 15 to 20 studios ‘Elica Hi life’ in next 2 years.

RECAP

Trending GL BALLY Coca-Cola bets big on recycling bottles

In a bid to enhance its sustainable expanse, Coca-Cola recently announced its plans to recycle as many beverage containers as it produces by 2030, but not necessarily all its own cans and bottles under the overall sustainability initiative, ‘World Without Waste’.

The other primary thrust of the program besides the recycling goals is ‘investments in packaging’. Under this initiative, the company will continue to work toward making all its packaging 100% recyclable globally, and building better bottles, whether through more recycled content, developing plant-based resins, or reducing the amount of plastic in each container. By 2030, the Coca-Cola system also aims to make bottles with an average of 50% recycled content.

The recycling goal will be achieved in part by strengthening local recycling programs and greater consumer education. On this initiative, James Quincey, CEO, Coke, said that future growth comes with further responsibilities. “As a company, we must grow with conscience.”

In doing so, the company believes the largest challenges will be in developing countries and the 25% of countries that don’t have any form of formal waste collection.

Similarly, other companies such as Pepsico previously announced a goal for having 100% of its packaging be recyclable or recoverable by 2025, while Nestlé aims to reduce its packaging material by 140,000 ton between 2015 and 2020.

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Starbucks to use blockchain to make coffee transparent from ‘bean to cup’ In an effort to increase transparency from ‘bean to cup’, Starbucks has become the latest food & beverage company to use blockchain technology.

The Seattle-based coffee giant said it is going to launch a pilot program to trace coffee beans from Costa Rica, Columbia and Rwanda using ‘traceability technology’. The new pilot program is part of the firm’s wider commitment to commit to sustainable and ethically sourced coffee beans.

The technology will log and share real-time information about the journey of the coffee beans and aims to positively impact smallholder farmers within its supply chain.

“Over the next two years, we will look to demonstrate how technology and innovative data platforms can give coffee farmers even more financial empowerment,” said Kevin Johnson, CEO, Starbucks. “Traceability technology could have profound implications for connecting coffee drinkers to the farmers who grow it,” added Arthur Karuletwa, director – traceability, Starbucks. “This could be a seismic change in an industry that hasn’t had much innovation in the way coffee moves across borders and

oceans,” he said.

Transparency has become a fast-emerging trend in the food and beverage sector, with a recent survey by the Hartman Group revealing that 69% of consumers say they want retailers to be more transparent about their sustainability efforts. As a result, many industry leaders have increasingly tapped into blockchain technologies to enhance their sustainability efforts and make their supply chains more visible.

For instance, US retailer Walmart recently partnered with tech giant IM and Tsinghua University in Beijing to investigate the use of distributed ledge technology to enhance the efficiency and transparency of its supply chain.

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RECAP

Samsung eyes blockchain technology to cut supply chain costs by 20%

Samsung is targeting the introduction of blockchain technology that could reduce its global shipping costs by up to 20%. Song Kwang-woo, VP, Samsung SDS, the Korean multinational’s specialist technology arm, has revealed the company is investigating the possibility of using a blockchain ledger system to ‘fuel its digital transformation’.

By automating channels of communication both internally and with port authorities, it predicts that it will be able to improve efficiency by up to a fifth – potentially saving billions of dollars every year. “It (blockchain) will have an enormous impact on the supply chains of manufacturing industries. Blockchain is a core platform to fuel our digital transformation,” he said.

Samsung works with approximately 2500 suppliers around

the world, building relationships around five key criteria: cost competitiveness, human resources capacity, on-time delivery, response to risk and supplier competitiveness. SDS says it will handle around 488,000 ton of air cargo and 1mn TEUs in 2018 alone. Last May, SDS launched a blockchain pilot to track imports and exports of shipments in Korea’s shipping sector, a trial that concluded at the end of the year.

Meanwhile according to a recent report by IndustryARC, the global blockchain in supply chain market is forecast to maintain a CAGR of over 48% between now and 2023, reaching a total valuation of $424mn by the end of the period.This significant market growth will be driven by the increasing number of companies looking to reap the benefits of blockchain within their logistics operations.

North America is expected to account for the majority of this growth with a forecast revenue of $131.65mn by 2023.

Meanwhile, the Asia Pacific is expected to grow at the fastest rate, predicted to maintain a CAGR of 56.1% through the next few years. Elsewhere, developing economies in the Middle East, Brazil and Africa are currently seeing a rise in the number of government initiatives centred around blockchain as a result of the increasing demand for digitization.The report cites that features including smart contracts, the transparency of the technology and the growing use of data throughout the supply chain industry are all factors that will contribute to this growth.

HP pledges supply chain transformation as part of its 3D journey HP intends to make large-scale improvements to its supply chain as part of its journey to full-scale 3D production.The company will leverage its own 3D printing technology to lower costs, speed time to market, increase customer satisfaction, and improve sustainability, HP is using Multi Jet Fusion across its print, personal systems, and 3D Printing business units.

Such a move will reduce design time by up to 50%, and saving millions of dollars in deferred tooling expenses, for numerous parts across HP products.

New materials utilization and part consolidation will also lead to lead times being reduced from months to days, 90% reduction in weight, 95% reduction in cost and more than 30x reduction in carbon footprint. Instead of expensive tooling and moulding, plastic parts for the new HP Z 3D Camera were produced with Multi Jet Fusion leading to significant costsavings and shortening the lead time by more than six weeks.

“HP delivers nearly 100 million products annually through a sophisticated network of HP factories, original design manufacturers, and logistics providers across more than 170

30 CELERITY May - June 2018

countries,” said Stuart Pann, Chief Supply Chain Officer, HP Inc. “This unique programme brings together product design, engineering, procurement, supply chain operations, and manufacturing to unleash the potential of Multi Jet Fusion.

“Embracing the design freedom of 3D printing, HP is making breakthroughs in cost, productivity, quality, and performance as we digitally reinvent our product lifecycle and supply chain.”

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