Vol. 01 | Issue 03 | JUNE 2010
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VIEWPOINT EDITORIAL
Don’t junk that green thought
Executive Editor Archana Tiwari-Nayudu Assistant Editor Esther Bardhan Features Editor Prerna Sharma Features Writer Vijay Maha Research Desk KTP Radhika Jinoy, Sumedha Mahorey Correspondents Desk Prasenjit Chakraborty, Shivani Mody, Geetha Jayaraman, Rachita Jha, Divya Sharma Karmakar, Ayesha Augustine Copy Desk Marcilin Madathil Product Desk Michael Anthony
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bandon and be done…is the philosophy that nations have been following as far as the proper disposal of electronic waste or more trendily referred to as e-waste management is concerned…and it remains so in most countries and India is no exception. To non-jargonise the term, e-waste is nothing but broken, obsolete or unwanted electrical or electronic appliances. Every sleek click clack of supremely evolved electrical and electronic gadgets means an addition to the already piled up e-waste junk…a step closer to a hazardous disaster waiting to happen. While healthy economic growth, better earning capacities, and hence, higher disposal income have prompted a spike in gadgets and gizmos spend, the discarded e-waste remains just that…abandoned and polluting. No thought is spared towards returning or properly disposing e-waste. Enter ‘Reverse Logistics’ of e-waste to the rescue. The relevance, criticality and the lack of attention prompted us to make this June issue of Smart Logistics a E-waste Management Special, as waste also happens to be the greatest threat to supply chain efficiency and the sustainability of world commerce and economy. Logistics, incidentally also happens to have a solution to this problem. It is in the nature of well-planned and executed reverse logistics norms and practices. Again reverse logistics of e-waste is
CORPORATE & EDITORIAL OFFICE Infomedia 18 Limited, Special Interest Publications Division, ‘A’ Wing, Ruby House, J. K. Sawant Marg, Dadar (W), Mumbai - 400 028, India Tel: +91-22-30245000, Fax: +91-22-30034499 Printed by Mohan Gajria and published & edited by Lakshmi Narasimhan on behalf of Infomedia 18 Limited and printed at Infomedia 18 Ltd, Plot no.3, Sector 7, off Sion-Panvel Road, Nerul, Navi Mumbai 400 706, and published at Infomedia 18 Ltd, ‘A’ Wing, Ruby House, J. K. Sawant Marg, Dadar (W), Mumbai - 400 028. Views and opinions expressed in this magazine are not necessarily those of Infomedia 18 Limited (Infomedia18), its Publisher, and/or Editors etc. We at Infomedia18 do our best to verify the information published but do not take any responsibility for the absolute accuracy of the information. Infomedia18 does not accept any responsibility for any investment or other decision taken by readers on the basis of information provided herein. Infomedia18 does not take any responsibility for loss or damage incurred or suffered by any subscriber of this magazine as a result of his/her accepting any invitation/offer published in this edition. © 2010 Copyright Infomedia 18 Limited, All rights reserved. Copying or reproducing any part of the magazine, save and except for personal use, without express written permission of Infomedia 18 Limited is strictly prohibited.
nothing but a process of moving goods from their typical final destination to another point for the purpose of capturing value otherwise unavailable or for their proper disposal. As per industry figures, 3 per cent of India’s GDP or approximately Rs 42 billion is lost to supply chain inefficiencies and low compliance with the government’s e-waste regulations. It is no wonder then that reverse logistics market is growing and gaining prominence. As per the statistics, 57 per cent of the Indian firms are expected to outsource reverse logistics in the next 5 years and India’s reverse logistics could be $10-15 billion industry. And here is the opportunity for the logistics sector, as it takes significant collaboration across multiple supply chain links to create a win-win green logistics solution. But there are spokes in this green wheel. In an industry driven by the need to increase turnaround times, but thwarted with logistics obstacles, it is difficult to set up a centralised return goods hub for repair, replacement, refurbishing, or disposal. Logistics excellence and best practices can make it possible and this edition is an attempt towards that bigger aim of achieving green footprints in ewaste management system. Let’s go green, and it starts with a fresh thought! Archana Tiwari-Nayudu Executive Editor archana.nayudu@infomedia18.in
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JUNE 2010 • SMART LOGISTICS • 5
CONTENTS INSIGHTS & OUTLOOK ADDING UTILITY TO E-WASTE
VOL. 01, NO. 03
JUNE 2010
14
Today, electronic companies are recognising the importance of aftermarket, owing to regulatory norms and revenue generating opportunities from e-waste management. It is here, where products are returned from point of origin to final destination for proper disposal or adding value, that reverse logistics platforms play a critical role...
Reverse Logistics Planned Route To Achieving Market Differentiation Reverse Logistics Turning Transportation Operations Green ‘‘A Balanced Green Supply Chain Is The Next Generation Supply Chain’’
16 20 24
Lenny Koh, Director-Logistics & Supply Chain Research Centre, The University of Sheffield, UK
TECH TRACK
48
IT Trends In Logistics
IT IN LOGISTICS DEMAND TRENDS
30
Entering New Growth Avenues
TMS Exploring Scalable Solutions
SL EXCLUSIVE
SUPPLY CHAIN BEST PRACTICES
Wireless Technology Spearheading Logistics Growth
Addressing Five Biggest Challenges Creating Smater Supply Chains of the Future
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SECTOR ANALYSIS
WAREHOUSING & DC
Food Logistics Preserving Freshness From Farm To Plate RFID In Food Supply Chain Enabling Real-time Traceability
Warehousing Safety Creating A Zero-risk Ambience
VIEW FROM THE TOP ‘Global 3PLs Will Play A Major Role In Defining The Supply Chain Dynamics Of The Country’ Pranil Vadgama, President, CHEP India
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38 42 26
LEADERSHIP SERIES
50 52 54 60
McNally Bharat Engineering Co Engineering A Better Tomorrow With Ideal Supply Chain Infrastructure
ALSO IN THIS ISSUE VIEWPOINT NATIONAL NEWS PROJECT UPDATE WORLD NEWS PRICE TRENDS PRODUCT & ADVERTISERS’ INDEX PRODUCT & ADVERTISERS’ INQUIRY FORM
5 8 10 12 37 66 67
NATIO AL EWS ■
OVERALL CAPACITY OF MAJOR PORTS TO EXCEED 800 MT BY 2011-12
On completion of the National Maritime Development Programme (NMDP), an addition of 402.91 million tonne of capacity is envisaged by 2011-12, and the overall capacity of major ports is expected to reach 800.41 million tonne. This was intimated by the Shipping Minister, GK Vasan, at the second meeting of the Parliamentary Consultative Committee attached to the Ministry. Of the total NMDP projects envisaged, 50 have been completed at a cost of Rs 5,717.28 crore, 74 projects are under progress, at a cost of Rs 16,502.68 crore, work on 16 projects has been approved at a cost of Rs 3,100.33 crore, but are yet to be awarded. Moreover, 29 projects have been firmed up, costing Rs 11,561.39 crore and are under the process of approval, 82 projects worth Rs 19,878.20 crore are under the preliminary planning stage and 25 projects worth Rs 5,961.41 crore have been dropped. The committee members were also informed that: • Andaman would soon be notified as a major port to join the league of the existing 12 major ports, which handle close to 72 per cent of the total sea-borne traffic of the country. • Traffic handled at the major ports during 2009-10 was 560.97 million tonne, a growth of 5.74 per cent despite global slowdown and recessionary trends. • In the ports sector, 276 projects were identified to be taken up under NMDP for implementation between April 1, 2005, and March 31, 2012, involving an investment of around Rs 55,804 crore at 2004-05 prices. • With the thrust on public-private partnership, these projects aim at all-round development of the ports. • The projected traffic of major ports during 2011-12 is 615.70 million tonne, and a capacity of about 800 million tonne is required to meet this traffic. • Of the investments envisaged for the ports, Rs 3,609 crore will come through budgetary support, Rs 13,771.54 crore through the ports’ internal resources, Rs 34,505.34 crore through the private sector and Rs 3,917.85 crore from other sources, including investments by the Ministry of Railways, NHAI, etc. • In the shipping sector, tonnage, as on April 1, 2010, is 9.61 MGT, ranking the country 17th in the world. • Tonnage has steadily increased after the introduction of tonnage tax. • NMDP has 111 projects worth Rs 44,535 crore in
shipping and the inland water transport sector, involving investments of approximately Rs 44,535 crore. Of these, 13 projects worth Rs 3,117.83 crore have been completed and 47 worth Rs 6,913.80 crore are under implementation.
The members called for early and time-bound completion of all NMDP projects to avoid cost overruns. They also discussed and gave suggestions on various sector-related issues, including cruise shipping, the floating university concept, utilisation of the Andaman Port to develop trade with Thailand, betterment of the existing ports, shortage of pilots, shortage of training institutions, security of vessels and security of Indians working in ships registered abroad, social and corporate responsibility of ports and major shipping corporations, land disputes at ports, etc. ■
TRANSSHIPMENT OF INDIAN GOODS VIA BANGLADESH LIKELY TO START IN JULY
The transshipment of Indian cargo through Bangladesh is likely to commence in July this year. Bangladesh and India have designated land ports to facilitate accelerated goods movement along their 4,300 km border. The government is likely to issue a circular before July 10 to allow the transshipment of Indian cargo. The customs department of the National Board of Revenue has reportedly sent a proposal regarding the transshipment to the law and parliamentary affairs ministry for further evaluation. According to the proposal, Indian cargo can have a stopover at the Ashuganj land port before passing over to the northeastern states of India. Bangladesh hopes to annually earn a revenue of Taka 32 billion ($ 46 million) from the transshipment. It would initially begin with transportation of heavy equipment to set up power plants in Tripura.
JUNE 2010 • SMART LOGISTICS • 7
National news, continued
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EXPORTS SET ENCOURAGING START IN FISCAL 2010-11
Despite the global economic situation, mercantile exports registered a robust 36.2 per cent growth in April to yield $16.9 billion when compared to April 2009. The government, however, reminded that the growth appeared large due to last year’s crunch. In April 2009, exports had shrunk by nearly 30 per cent to $12.4 billion following the worldwide financial crisis. Indeed, exports had contracted for 13 straight months starting October 2008, before turning positive in November 2009. As pointed out by the Commerce Secretary, Dr Rahul Khullar, “Don’t get carried away by these numbers... because the base was low and that’s why you have an increase in percentage terms. You are still running below the export level in April 2008-09.” The low base effect makes even a nominal increase now appear large because the numbers in the year-ago period were too low. Still, imports too increased in April by 43.3 per cent to $27.3 billion from $19.1 billion in April 2009. The trade deficit in April was estimated at $10.4 billion, as against $6.7 billion in the year-ago period. Oil imports increased to $8.1 billion, as against $4.7 billion in April last year. Dr Khullar expressed concern over the Euro zone debt crisis and the US’ slow economic recovery. The US and the European Union are traditional markets for exports, with the EU alone accounting for a fifth of the total shipments, while exports to the US comprise 12 per cent. Therefore, to expect exports in 2010-11 to grow at 25-30 per cent was a pipe-dream, Dr Khullar cautioned. The government has set an export target of $200 billion for 2010-11, a 13 per cent growth over the $176.5 billion achieved in 2009-10. Dr Khullar said the Commerce Ministry was doing an exercise in consultation with the industry to understand which sectors need to be incentivised in the forthcoming Foreign Trade Policy supplement to boost exports. ■
RAILWAYS FREIGHT LOADING UP 3.32%
Railways registered a freight traffic growth of 3.32 per cent in April this year against the corresponding period last fiscal, carrying 69.85 million tonnes of cargo. However, the Railways freight earnings in April 2010, registered a 9.57 per cent over the corresponding period last year. The gap between the two growth rates could be seen as an indicator of the increase in freight charges. According to an official release, during April 2010, the revenue earning freight traffic carried by Indian Railways was 72.17 million tonne (mt). There is an increase of 2.32 mt over the freight traffic of 69.85 mt actually carried by the Indian Railways during the same period last year, reflecting a 3.32 per cent growth. ■
SINGLE PERMIT TO ALLOW TRUCKS TO TRAVEL ACROSS COUNTRY
A new regime permitting goods carriers access to the whole country on a single permit came into force after
8 • SMART LOGISTICS • JUNE 2010
negotiations between transporters and the government. The new composite fee regime for national permit allows trucks an access to all states for a year on a payment of Rs15,000. The regime, which was earlier scheduled to be implemented from May 1, was delayed by a week due to some issues raised by some states. The decision to implement the regime was taken in a meeting between principal secretaries and transport commissioners of states and Union Territories. The states have, however, expressed that it may take them some more time to make the necessary amendments in taxation laws to facilitate the regime’s implementation. Under the new scheme, states will issue a single national permit for Rs15,000 per truck annually, helping operators save around Rs10,000. As stated by GR Shanmugappa, president, All India Motor Transport Congress, “This is the most cherished gift to this industry as India has now become one union in road transport like the railways.” ■
AIRLINES VYING FOR MAJOR SLICE OF RISING CARGO VOLUMES
Air cargo carriers are witnessing a strident growth in cargo traffic. Air cargo is expected to grow by 15 per cent on international routes and 6 per cent on the domestic sector in 2010-11. Jet Airways carried 96,386 tonne of cargo on global routes in 2009-10, a 87 per cent increase when compared to 2008-09. Adding to this, Jay B Shelat, VP–Cargo, Jet Airways, said, “Currently, our cargo division contributes 7-8 per cent of the total revenue. Cargo constitutes 12 per cent of Jet’s revenue from international operations and 4 per cent from domestic operations. In two years, we want to boost revenues from air cargo to around 15 per cent and 6 per cent on international and domestic operations, respectively.” He, however, lamented that constrained infrastructure at various airports was a serious challenge but was hopeful that the government would take adequate steps to help the cargo sector flourish. Government efforts to develop air cargo market include the increase of foreign direct investment in cargo and nonscheduled airlines to 74 per cent. Plans are also on to develop Nagpur as a cargo hub through large-scale investments into Multimodal International Hub Airport (MIHAN) project. Also, as part of its revival plan, Air India (AI) is in the process of increasing its cargo capacity several fold. Cargo operations now contribute Rs 800 crore to AI’s topline of Rs 17,000 crore. AI has converted six of its older aircraft B737-200 into freighters and wants to enhance its share in the international cargo market to over 25-30 per cent initially, while more than a dozen airlines from other countries carry the balance of the country’s cargo. Following suit, the low-cost carrier, SpiceJet, recently added Goa to its existing network of domestic cargo operations. It has expanded cargo operations in Delhi, Hyderabad, Mumbai, Chennai, Bengaluru and Kolkata in less than a year.
■
COASTAL SHIPPING HOLDS POTENTIAL TO REDUCE FREIGHT COST EXPONENTIALLY
“The freight cost reduction could be up to the tune of 75 per cent to 25 per cent, if shipping is used as the mode of transportation instead of other means including road and air,” informed Dr Satish Balram Agnihotri, IAS, Joint Director General – Shipping, Directorate General of Shipping (GOI), while addressing the conference on ‘Green Logistics 2010, Green Philosophy in Logistics & Supply Chain’ organised by CII Institute of Logistics. While deliberating on the topic ‘Coastal Shipping – Why the ‘Suitable boy’ is not getting married?’, he said, “Coastal shipping creates a win-win situation for the traders, as it reduces the cost of transportation and the comparative carbon emission levels are also lower. However, the process of transportation through shipping from the desk to dock and dock to desk is not hassle-free. If a mechanism that can reduce hassles is created, the shipping sector along with traders can benefit with green solutions.” He suggested that the CII could play a significant role towards developing such a mechanism. Speaking on ‘Power of Green: Trend to Indian Supply Chain’, Prof Lenny Koh, director – logistics and supply chain management, The University of Sheffield, UK, said, “India is taking substantial measures towards reducing carbon emission levels. The trend suggests that the emission levels in China are more than that of India.” B Sridhar, member, CII National Logistics Council, & director, Bengal Tiger Lines, said that the CII was closely working on developing environment-friendly supply chain management systems through various initiatives. “The CII Institute of Logistics was established four years back having four main pillars of functioning including education, training, advisory and events and conferences to spread awareness.” KV Mahidhar, head – CII Institute of Logistics, assured that CII will co-ordinate with all stakeholders to promote coastal shipping and carbon credits mechanism in logistics sector. ■
DHL BOOSTS FREIGHT SERVICES FROM INDIA
DHL recently announced the opening of its new ocean freight terminal in Cochin and the launch of its weekly direct ‘less than container load’ (LCL) Consol services connecting Cochin, India to Europe, North America and emerging markets via DHL’s multinational gateway in Colombo, Sri Lanka. DHL’s in-house carrier, the new service from Cochin via Colombo offers customers reliable and superior services with reduced transit times of up to three days. LCL refers to smaller amounts of ocean freight cargo that are insufficient to fill a full container load (FCL) on its own. The service is widely used by customers across many industries as it offers greater flexibility in the management of supply chains by being able to ship smaller quantities on a more timely basis. Cochin is a major port on the west coast of India and
is gaining prominence as an important gateway for India’s trade. Cochin serves not just the state of Kerala, but also the neighbouring states of Karnataka and Tamil Nadu, all of which are witnessing high growth rates in foreign trade. With nearly all key infrastructure projects linked to the transshipment terminal being close to completion, Cochin is expected to become a major hub of maritime export and import trade. Port authorities expect to handle 6,00,000 TEUs in the first year and an impressive 3 million TEUs by 2014. Amadou Diallo, CEO, DHL Global Forwarding, South Asia-Pacific, said, “With the timely introduction of this new LCL service, we can offer opportunities to our customers to increase their footprint in global commerce as the global economy picks up. “This fixed direct LCL Consol service connecting Cochin to the rest of the world has further strengthened our ocean freight product to support customers, especially in the spices, palm oil and coir business sectors,” he added. DHL recognises LCL as being a crucial part of the total ocean freight product and the company is strengthening its market leading position through dedicated resources to system development and maintenance. DHL Global Forwarding is one of the leading LCL freight forwarders in the world with annual volumes close to 2,000,000 cbms. Speaking on the occasion, Christoph Remund, CEO, DHL Lemuir Logistics India, said, “The launch of this vital service is part of DHL’s ongoing plans to expand its own operated, weekly guaranteed, LCL services globally. This is in line with our commitment to the Indian logistics industry to provide value-added solutions to customers through constant product innovation and increased efficiency.” Sanjay Tejwani, director – oceanfreight, DHL Global Forwarding India, added, “The launch of the new service will boost trading activities between Cochin and the rest of the world. In particular, small and medium enterprises will benefit from our service flexibility and reliability.” ■
TNT ENHANCES OPERATIONS INFRASTRUCTURE IN EASTERN INDIA
TNT has launched a high growth strategy for India with a focussed plan for enhancing its infrastructure and connectivity across India. Keeping in mind the overall objective for TNT’s accelerating growth in India, it will add over 1 lakh sq.ft. to the existing facilities in eastern India. TNT has set up new facilities in Patna, Jamshedpur, Bhuvaneshwar and Ranchi recently. Existing facilities in cities like Kolkata, Howrah, Behragowda, Siliguri, Guwahati, Cuttack, etc will further be strengthened. Additionally TNT will also improve connectivity of the region within India with its other regional hubs as well as international sectors, especially China and Europe. Abhik Mitra, MD, TNT India, said, “We have seen that there is a huge potential in eastern India, both from an outbound and inbound perspective, and have made a conscious decision of upgrading and expanding our infrastructure in the region.”
JUNE 2010 • SMART LOGISTICS • 9
PORT PROJECT UPDATE GUJARAT PIPAVAV PORT TO INVEST RS 200
ENNORE PORT EXPANSION BY SEPTEMBER
Gujarat Pipavav Port (GPPL), which is awaiting the SEBI nod for its proposed IPO to raise Rs 500 crore, plans to invest nearly Rs 200 crore, out of the capital market proceeds, on further development of infrastructure at the port. The company will use the proceeds from the IPO to repay Rs 300 crore worth of debt and Rs 200 crore for acquiring a crane, developing rail sidings, a container yard and building of roads at Pipavav, said Prakash Tulsiani, MD, GPPL. GPPL had so far invested Rs 1,500 crore at Pipavav. APM Terminals has a 58 per cent stake in the port it runs while the rest is with the financial institutions. The port’s current capacity includes handling of six lakh TEUs of container cargo and 500 million tonne of bulk cargo, but only half of this capacity is being used at present, he added. After failing to launch its IPO in 2008 due to the global economic recession, GPPL had filed a fresh Draft Red Herring Prospectus (DRHP) with SEBI on December 23, 2009, and is now awaiting approval, he told. The port handled 2.38 million tonne of bulk cargo and 0.21 million TEUs of container cargo in the nine-month period ended September 30, 2009. GPPL also has a dedicated rail line up to Surendranagar in Gujarat, being run by a joint venture with Indian Railways, Pipavav Railway Corporation, which handles the racks segment of the port logistics.
The expansion project of Ennore Port envisages the setting up of an iron ore terminal (Rs 480 crore) in two phases, a coal terminal (Rs 399 crore), and a multipurpose berth and cargo terminal (Rs 110 crore). Iron ore terminal: The 12-million tpa iron ore terminal is being developed in two phases of 6 million tpa each. Over 80 per cent of work under phase-I, costing Rs 360 crore, has been completed. The terminal will have an alongside depth of 15 metre in phase-I and 18 metre in phase-II, and quay length of 525 metre. The project is being undertaken by Sical Iron Ore Terminals, a special purpose vehicle promoted by Sical Logistics, with 89 per cent equity stake, and L&T Infrastructure Development Projects. Coal terminal: About 83 per cent of work on the 8-million tpa coal terminal project has been completed. The terminal will have an alongside depth of 15 metre and a 325-metre long jetty. The project, estimated to cost Rs 399 crore, is being developed by Chettinad International Coal Terminal, a joint venture between South India Corporation, Portia Management Services of UK and Navayuga Engineering. The coal terminal will cater to entities other than Tamil Nadu Electricity Board. Multipurpose berth: About 64 per cent of work on the 5million tpa general cargo berth and 93 per cent of dredging have been completed. Work on a parking yard for two lakh cars per annum is underway. The jetty and stackyard have also been completed.
CRORE ON INFRASTRUCTURE
JSW INFRA TO INVEST RS 10,000 CRORE TO
DEVELOP 5-6 PORTS
JSW Infrastructure & Logistics plans to invest Rs 10,000 crore to develop 5-6 ports in India in the next 10 years, a top company official said recently. “We have prepared a roadmap to develop 5-6 ports in India and will invest Rs 10,000 crore for this in the next 10 years,” said BVJK Sharma, joint managing director and CEO, JSW Infrastructure. “Our aim is to increase the total cargo handling capacity to 180 million tonne,” he said. The company is in the process of identifying locations for the proposed ports. It will raise 75 per cent of the total investment through debt, Sharma said. Besides, JSW infrastructure will build a ship maintenance facility in Dhabol, Maharashtra, he said. JSW Jaigarh Port, a wholly-owned subsidiary of JSW Infrastructure & Logistics, has a capacity to handle 20 million tonne cargo, which can be expanded up to 50 million tonne, observed Sharma. It has been designed to handle mega capesize vessels and can accommodate seven ships. It will mainly cater to the coal requirements of JSW Energy’s 1,200 MW power plant. Apart from coal, it plans to handle fertilisers, bauxite and raw sugar as well. “The total capex is Rs 2,500 crore,” Sharma said. JSW Jaigarh Port is the second-largest in Maharashtra in terms of draught and has the ability to handle ships bigger than Panamax vessels.
10 • SMART LOGISTICS • JUNE 2010
2010
MULTIPURPOSE BERTH FOR PARADIP PORT The Cabinet Committee on Infrastructure has approved a project to develop a dedicated multipurpose berth to handle clean cargo, including containers, at Paradip Port in Orissa on BOT basis at an estimated cost of Rs 387 crore. The project envisages the construction of clean cargo and container handling facilities of 5 million tpa capacity. The multipurpose berth will enable efficient handling of vessels, facilitated by mechanised operations, and will reduce the cost of cargo handling. The project is scheduled to be completed within 36 months from the date of award of contract.
CUDDALORE PORT IN PPP MODE The Tamil Nadu Maritime Board (TNMB) plans to develop the Cuddalore minor port through public-private partnership. IIT-Madras has suggested three-phase development of the project at an investment of Rs 125 crore. The port has infrastructure such as breakwater, administrative buildings and barge loading and unloading berths, and about 100 acres under the control of TNMB. Owing to fund limitations, the maritime board wants to develop the port infrastructure on develop-operate-maintain-share-transfer basis on a 30-year concession period.
MUMBAI PORT TRUST PLANS NEW TERMINALS Mumbai Port Trust (MbPT) is planning to create dedicated facilities for containers, dry bulk, preshipment storage and related infrastructure, and increase traffic from 54.54 million tpa currently to over 100 million tpa. MbPT proposes to invest around Rs 1,460 crore for the development of an offshore container terminal with two berths of 700 metre that are extendable by 350 metre. Of the total, Rs 1,015 crore will come from the BOT operator and the balance Rs 445 crore will be invested by MbPT. The terminal, scheduled to be completed by March 2012, will have a capacity of 1.2 million TEUs. A Rs 1,861-crore investment has also been earmarked to develop a cruise terminal that will have berth for handling two ships at a time and cater to 10-metre draft vessels. The cruise terminal is likely to comprise a marina, convention centre, and other entertainment and recreation facilities. The port trust is to set up a second liquid chemical berth to handle A,B & C grade chemicals with an investment of Rs 116 crore. The berth is likely to have a draft of 11.5 metre and a capacity of 2 million tpa. It also plans to invest around Rs 662 crore to develop new berths to handle fully-loaded Suezmax tankers. Plans are also afoot to set up a 1.75-million tpa dry bulk terminal on PPP basis at an estimated cost of Rs 45 crore. Another Rs 30 crore is to be invested for developing a 2-million tpa cargo terminal.
CPT TO INVITE BIDS FOR MEGA CONTAINER
PROJECT
Chennai Port Trust will soon invite financial bids for a mega container terminal project to be set up at a cost of Rs 3,686 crore. The port trust is awaiting security clearance for the PPP project that received nine bids for the request for prequalification invited last year. Meanwhile, the port trust has scaled down the cost of the Chennai-Ennore Port road connectivity project from Rs 600 crore to Rs 500 crore owing to fall in steel and cement prices. The project SPV is inviting fresh tenders. Other project investment for the current fiscal are Rs 49.31 crore for a windmill farm, Rs 49 crore for modernisation of firefighting system at the oil terminal, and Rs 40 crore for road improvement.
ESSAR SHIPPING STARTS OPERATION OF HAZIRA
BULK TERMINAL
Essar Shipping Ports & Logistics has commenced commercial operations of its all-weather, deep water 30 MTPA state-ofthe-art bulk terminal at Hazira, in Surat district of Gujarat. The terminal set up at a cost of Rs 800 crore is one of the largest dry bulk terminals in India. With the commissioning of this facility, Essar’s total cargo handling capacity, between Hazira and Vadinar, has now increased to 76 million tonne per annum, making Essar one of India’s largest private port operators.
The terminal became operational with the berthing of the first supramax vessel – MV Malavika. The 550-m long berth is capable of accommodating larger vessels directly alongside the berth throughout the year and can now become the gateway terminal of Gujarat for deep draught vessels. This terminal facility will serve as a fully integrated transportation hub that will not only support Essar Steel Hazira’s expanded steel-making capacity of 10 MTPA but will also result in faster services and substantial savings for other trade and terminal users. The terminal is connected to the high seas of the Gulf of Khambatt by a 7.2-km navigation channel with a width of 230 m and a depth of 8 m below chart datum (CD). The dredged channel, which is being widened and deepened further, will soon be able to accommodate mini cape-sized vessels up to 105,000 deadweight tonnage (DWT).
KOLKATA PORT REVIVES PLANS FOR DIAMOND
HARBOUR BOX TERMINAL
The proposal for a container terminal at the Diamond Harbour on the Hooghly river under the Kolkata Port Trust (KoPT) is being revived again. The proposal went into backburner as the defence authorities were opposed to part with its riverfront land identified as suitable for the project. The defence authorities had earlier declined to part with 43 acres of its land at the Diamond Harbour for the proposed container jetty by the Kolkata Port Trust because GRSE, the local ship-builder under the Defence Ministry, had insisted that it would need the land for setting up its own facilities. At a recent meeting, the Secretary, Defence Production, it is learnt, agreed to part with the Diamond Harbour land to the KoPT, provided GRSE was given an alternative site on the river front. The KoPT would consider giving about 20 acre of its land on the river at Roychowk further down the river. The KoPT authorities also agreed to consider to offer two of its dry docks in Netaji Subhas dock to GRSE on long-term lease as these dry docks at present were mostly used by the naval vessels. The proposed Diamond Harbour container terminal, to be complete with four ship jetties and three barge jetties, was estimated to cost Rs 1,250 crore two years ago. The capacity was estimated at 1.6 million TEUs annually. The project would need about 125 acre land of which 43 acre on the riverfront belonging to defence authorities is considered most critical. The West Bengal Government has indicated to provide 15 acres of its own land to facilitate the implementation of the project. The Directorate General of Lighthouse and Lightships, under the Shipping Ministry, has 23 acre which, it is felt, will not be difficult to obtain. An additional 2.5 acre under the railways, to be needed for rail connectivity to the proposed terminal, too would be available. Finally, another 40 acre of private land needs to be acquired. Since this is not a farm land, the port authorities do not foresee any major obstacle in its acquisition.
JUNE 2010 • SMART LOGISTICS • 11
WORLD
EWS
■ TRANSPORTATION DEALS ON THE RISE
IN 2010
The merger and acquisition (M&A) environment continues to exhibit signs of recovery in the global transportation and logistics sector, demonstrated by the general rise in overall deal activity in Q1 2010, according to a new PricewaterhouseCoopers LLP report. In the first quarter of 2010, the pace of deal announcements in the transportation and logistics sector was strong, as compared with 2009. There were 34 deals announced in the first quarter, which exceeds the total number of deals announced in each of the four quarters last year. Additionally, this quarter’s aggregate deal value is all set to approach the value level of 2009; however, when excluding a major rail transaction from 2009 totals, 2010 deal value is actually on the pace to far exceed last year’s level. This improvement may indicate that acquirers are gaining confidence to engage in larger deals. “The positioning of acquirers to engage in deal activity continues to improve, supported by generally higher levels of traffic as well as better liquidity and capital market conditions,” says Kenneth Evans, US transportation & logistics leader, PricewaterhouseCoopers. “Rising expectations for economic growth may encourage those acquirers who have remained on the sideline to re-enter the deal market.” Despite improved conditions for raising capital, minority stake purchases jumped in the first quarter of 2010, and deal participation shifted slightly towards strategic investors. While the increase in minority stake purchases continues a trend from Q4 2009, the shift towards strategic investment is a trend reversal from the previous quarter, in which financial investor participation had improved on a relative basis. The relative level of M&A activity for Asia and Oceania targets increased throughout 2009 and in Q1 2010. Asia and Oceania targets accounted for approximately half of all announcements in 2009 as well as in the first quarter of this year, compared to approximately 35 per cent in 2008. A single passenger air mega-deal in Q1 2010 led Asia and Oceania acquirers and targets to account for the majority of deal value, comprising 78 per cent of deal value by target region. “Acquirers in the Asia and Oceania region and in emerging & developing economies are increasingly making their presence felt in M&A activity relative to acquirers outside these areas,” says Klaus-Dieter Ruske, global transportation & logistics leader, PricewaterhouseCoopers. “This growth has been driven by deals involving Chinese entities, in addition to a concurrent decline in deals by European acquirers.” According to the PwC report, as the global economy begins to recover, deal making might offer the leverage that the transportation and logistics companies need to move ahead of the competition. Companies with strong balance sheets and robust cash reserves are expected to be in the best position for strategic merger and acquisition opportunities.
12 • SMART LOGISTICS • JUNE 2010
To get the deals done properly, PwC suggests that transportation and logistics companies should consider how two years of economic contraction have altered the balance of supply and demand within the value chain, as well as the cost structure impact of certain issues including healthcare, climate change, commodity prices, pension plan structures and changing tax laws. M&A activity inevitably generates a certain amount of immediacy, so it pays to be prepared. According to the report, companies that might be rusty in the area of due diligence because few (if any) deals were completed during the past two years may need to dust off their existing processes and make sure the right resources are in place, so that they are ready when opportunity knocks.
■ GLOBAL BOX TRAFFIC TO TOUCH
135 MILLION TEUs THIS YEAR
Transpacific and Asia-Europe containerised cargo volumes have been projected to increase by around 7 per cent and 11 per cent, respectively, this year, according to the latest Container Intelligence Monthly, released by Clarkson Research. The positive forecast, which also projects that shipping demand will outstrip carrying capacity by 2.7 per cent this year, follows the already favourable growth indicators seen in the first quarter. Earlier, the World Bank projected that global real gross domestic product (GDP) would grow by 2.7 per cent this year, after contracting by 2.2 per cent in 2009. Other forecasts by the International Monetary Fund (IMF) suggested that nominal GDP would grow by as much as 4.5 per cent. These forecasts seem to be improving almost on a daily basis. However, there are a number of factors present in the global market that could threaten a true recovery this year, such as the Greek economic crisis, and the fear that Greece’s problems could spill over to other countries. These developments will no doubt be watched carefully by the shipping industry, which is optimistic of not only a return to growth this year, but a relatively strong return. Clarkson predicted that worldwide container traffic would rise from last year’s 124 million TEUs to 135 million TEUs this year—representing a year-on-year growth of 8.8 per cent. Although this growth may seem impressive, it is important to remember that the industry will be looking to not only grow from last year, but also to return to pre-recession volumes. If the forecast is accurate, container shipping demand in 2010 will come in at just 1.45 per cent under 2008’s 137 million TEUs in global volumes. This essentially means that by 2011, the industry would be back on track.
■ ASIA CONTRIBUTES MOST TO EUROPE’S Q1
BOX VOLUME GROWTH
The latest data from the European Liner Affairs’ Association (ELAA) has shown that imports into Europe during JanuaryMarch 2010 increased by almost 17 per cent when compared
to the same period of 2009 to touch 5 million TEUs. Exports increased by 17.5 per cent year-on-year to reach 3.6 million TEUs. The growth was largely fuelled by increases in AsiaEurope volumes, with imports from Asia increasing by 20 per cent year-on-year to 3.1 million TEUs. Asia’s exports increased by 21 per cent to hit 3.1 million TEUs. European exports to North America were up by almost 11 per cent year-on-year at 7,22,000 TEUs, while traffic in the opposite direction increased by 14 per cent to total 6,87,000 TEUs. The increase in Asia-to-Europe volumes was reflected by continuing increases in rates, ending the quarter 18 per cent higher than the average level for 2008. However, other data showed that westbound Asia-Europe rates softened in March and April, falling from around $1,950 per TEU at the start of April to $1,818 per TEU at the end of the month.
though it notes that it is starting from the low point of the recession. The forecast uses 2009 as a baseline, and projects freight tonnage and revenue by mode to 2021, as well as the number of trucks that will be needed to move the freight. Trucking’s share of US freight will rise slightly, from 68 per cent of total tonnage in 2009 to 70.7 per cent by 2021, the ATA report says. The report expects trucking’s big competitor, rail, to lose a small amount of total tonnage, with its share dropping from 14.7 per cent in 2009 to 14.1 per cent in 2021. Figures on intermodal growth – fast becoming the focus of federal transportation policy – were not released. Water and pipeline tonnage will grow slightly, the report said. The report forecasts a 36 per cent increase in air freight tonnage over the 12-year period, with domestic air tonnage rising to 18.4 million tonne by 2021.
■ ASIA AIR FREIGHT JUMPS 32%
■ NAFTA TRADE SOARS TO A RECORD 24.1%
Cargo traffic for Asia-Pacific airlines grew 32.1 per cent in April as carriers expanded capacity at the sharpest rate yet to meet recovering demand in the region, according to the Association of Asia Pacific Airlines. In the last four months freight business has grown more than 30 per cent for carriers over the depressed period at the start of 2009. It also marked the fifth straight month of accelerating capacity expansion, with freight capacity growing 13.2 per cent over the same month a year ago. The April figures also gave the Asia airlines 34.1 per cent more freight traffic in the first four months of 2010 than they measured in the same four-month period a year ago. “Overall, traffic demand is now back to the levels seen before the recession,” said AAPA Director General Andrew Herdman. Although the figures were sharply ahead of last year, April’s figure for total freight metric-tonne kilometre flown was slightly behind the measure for March, suggesting that momentum in demand recovery has slowed down and carriers will see smaller growth figures in coming months as year-over-year comparisons get tougher.
■ US FREIGHT TONNAGE TO
GROW 25% BY 2021
The nation’s freight tonnage shrank almost 13 per cent last year, but is set to expand 25 per cent by 2021, according to a report by the American Trucking Associations (ATA). Freight revenue will grow 69 per cent through 2021, the ATA US Freight Transportation Forecast says,
Surface trade of the US with Canada and Mexico rose for the third consecutive month in February, surging a record 24.1 per cent compared to same period last year, one of the slowest months of the recession. Trade using surface transportation between the US and its North American Free Trade Agreement (NAFTA) totaled $59.5 billion in value, according to the Bureau of Transportation Statistics (BTS) of the US Department of Transportation. The 24.1 per cent increase is the largest year-over-year rise on record, but freight value still remained 14.3 per cent less than the value two years ago in February 2008, BTS said. NAFTA surface trade increased 4.9 per cent compared with January 2010. Surface transportation consists largely of freight movements by truck, rail and pipeline. In February, 87.6 per cent of US trade by value with Canada and Mexico moved on land. The US-Canada surface transportation trade totaled $36.3 billion in February, up 21.7 per cent compared to February 2009. The value of imports carried by truck was 6.4 per cent higher in February 2010 compared to February 2009, while the value of exports carried by truck was 23.5 per cent higher during this period, said BTS in its report. The US-Mexico surface transportation trade totaled $23.2 billion in February, up 28 per cent compared to February 2009. The value of imports carried by truck was 27.6 per cent higher in February 2010 than February 2009 while the value of exports carried by truck was Trucking’s share of US freight is expected to rise from 68% of total tonnage in 2009 to 70.7% by 2021. 18.3 per cent higher.
JUNE 2010 • SMART LOGISTICS • 13
INSIGHTS & OUTLOOK
REVERSE LOGISTICS
ADDING UTILITY TO
E-WASTE Today, electronic companies are recognising the importance of aftermarket, owing to regulatory norms and revenue generating opportunities from e-waste management. It is here, where products are returned from point of origin to final destination for proper disposal or adding value, that reverse logistics platforms play a critical role. While facilitating orderly disciplined disposal of e-waste, reverse logistics promotes alternative use of resources that are generated from proper recycling of e-waste. This three parts article series delves into details as to how reverse logistics converts e-waste into a useful commodity, thereby extending the life of an electronic product.
AS a consumer, we worry about value for money and we do not hesitate to return products that do not function as expected. But how much thought do we give to returning or properly disposing goods that are hazardous to health? As citizens, we need to be aware of globally endorsed activities and numerous national initiatives implemented to handle hazardous materials effectively, and thereby improve health and safety of our environment. Few of these initiatives are given below: • The European Community directives on Waste Electrical and Electronic Equipment (WEEE) (2002/96/EC) and on the Restriction of the use of certain Hazardous Substances (RoHS) in Electrical and Electronic Equipment (2002/95/EC) aim to reduce the quantity and environmental impact of waste from electrical and electronic equipment and increase its reuse, recovery & recycling.
14 • SMART LOGISTICS • JUNE 2010
• The Basel Convention is an international organisation dedicated to the control of transboundary movements of hazardous wastes and their disposal, and is the most comprehensive global environmental agreement on hazardous and other wastes. • The Government of India has reiterated its commitment to waste minimisation and control of hazardous wastes, both nationally and internationally, and the Basel Convention was signed by India on March 15, 1990. Since the signing of Basel Convention, numerous Indian organisations and various government bodies have pitched to raise awareness and challenge Indian corporations and citizens to follow proper e-waste disposal guidelines.
IMPACT OF ‘WEEE’ ON HEALTH, SAFETY AND THE ENVIRONMENT Various studies indicate that WEEE
accounts for almost 90 per cent of the e-waste generation in India, namely: • Large household appliances: 42.1 per cent • Information and communications technology equipment: 33.8 per cent • Consumer electronics: 13.7 per cent It is also reported that the key WEEE challenges in India are: • Rapidly increasing e-waste volumes • Inaccurate estimates of the quantity of e-waste generated and recycled • Low-level of awareness amongst manufacturers and consumers • Widespread e-waste recycling in the informal sector using rudimentary techniques • E-waste workers have little or no knowledge of the toxins in e-waste • Inefficient recycling processes result in substantial losses of material value E-waste consists of broken, obsolete or unwanted electrical or electronic appliances. The Basel, Switzerland
institute on global ‘e-waste’ management officially considers ‘e-waste’ as hazardous material. Leading governments agree that a significant number of components of such electronic equipment are considered toxic and non-biodegradable. Let us consider the impact that ewaste has on human and environmental health. A person’s health is a direct reflection of what he eats, breathes and what he comes in contact with in his environment. In India, thousands of unemployed elderly and young children spend their day, rummaging through shards of metal, glass and wire, dismantling e-waste. Typically, e-waste is collected and stored in the open and processed by individuals using crude ‘burn-off’ systems, releasing toxic fumes and poisonous chemicals into the air and water systems. These pollutants, in turn, adversely affect human health and disturb ecological balance. The above-mentioned global e-waste focus organisations determined that the greatest threat to the sustainability of our health, natural resources and our environment is inappropriate hazardous waste management.
OVERCOMING IMPACT OF ‘WEEE’ THROUGH SUPPLY CHAIN Waste also happens to be the greatest threat to supply chain efficiency and the sustainability of world commerce and economy. Let us examine the truths and put forth two questions: • Reduction in the production volume of goods that expand carbon footprint and consume excessive fuel and electricity will lead to a proportional reduction in the impact of WEEE on the environment. So how can we reduce production volume and still meet growing consumer demand? • Proper recycling of hazardous goods such as computers and peripherals, electrical appliances and mobile phones can resolve issues related to health, safety and environment. So, how to recycle goods in an economical manner?
THE WAY FORWARD E-waste processing produces fine metals like gold, silver, copper, palladium, aluminium and platinum. These by-products
ACT
E-waste processing produces fine metals like gold, silver, copper, palladium, aluminium and platinum. These by-products represent attractive economic opportunity for various target industries. However, e-waste also generates toxic chemicals like zinc, lead, cadmium, mercury, PVC and arsenic that are left to contaminate the air, ground and water while creating serious health issues for the entire population. represent attractive economic opportunity for various target industries. However, ewaste also generates toxic chemicals like zinc, lead, cadmium, mercury, PVC and arsenic that are left to contaminate the air, ground and water while creating serious health issues for the entire population. According to the MAIT-GTZ e-waste assessment study, India will create 4.7 lakh tonne of e-waste in 2010. The only way citizens of India can take control over this rapidly increasing hazard is to be certain that the government draft on e-waste is implemented in full. As per the draft, E-waste (Management and Handling) Rules 2010, “The producer and occupier of electronic goods including household appliances, computers, toys and medical equipment shall be liable for collecting any e-waste generated while manufacturing and will have to channelise it for recycling.” Besides the sanction and execution of the mandate enclosed in the draft, the citizens of India must collectively ensure that e-waste is collected professionally and processed by international standards. Few of the standards are given below: • Collection – Maximum effort and proper reverse logistics operations linked to certified recyclers with strict observance on e-waste pick up, packaging, storage and transport disciplines • Processing – Safe and complete product de-manufacturing processes including sophisticated metal refining and government authorised hazardous material disposal through certified recyclers only.
RETURNS MANAGEMENT CHALLENGES If we shift to the pre-e-waste side of the picture, returns management, a strong commercial as well as moral purpose to improving management of returns can be witnessed. Goods returns are growing with the growth in the pace of e-commerce retail sales. While the
historical rate for returning merchandise is about 5 per cent, some estimates suggest that online-driven products realise return rates in excess of 30 per cent. The trend of exchanging obsolete or dysfunctional electronic products for high-performance gadgets is catching up in India. However, instead of returning low-performing gadgets few customers dispose the units in the most inappropriate way. Therefore, it is essential that the manufacturer or retailer associate themselves with the customers at the product disposal stage to facilitate appropriate disposal of products through the supply chain. This association will enable the retailers to gauge the costs of receiving and moving the used electronic products in a reverse manner, back through the distribution channel or through a logistics service provider (LSP). While OEMs such as Nokia, Sony Ericsson, Whirlpool, LG, Samsung and Canon are today looking to put serious money into competitive and sustainable reverse logistics platforms, these platforms can work only when the government formulates improved return policies and emphasises on adherence to product warranties. Ideally, an average performing electronic product must be properly repaired or refurbished and allowed to re-enter a secondary market that sells the units outright or supplies accessories, spare parts, second-hand components and other goods & services used in the repair and maintenance of used goods. If feasible, the second phase of a wellplanned reverse logistics operation should look at combined product distribution with backhauls, and not just the synergies of consolidating e-waste and returned merchandise. L Sanford, Director, Applied Logistics India and Rohan Gupta, COO, Attero Recycling E-mail: lloyd.sanford@sekogln.com
JUNE 2010 • SMART LOGISTICS • 15
INSIGHTS & OUTLOOK
REVERSE LOGISTICS
PLANNED TO ACHIEVING
MARKET
DIFFERENTIATION Companies can achieve market differentiation through a strong reverse logistics programme. When reverse logistics plan is effectively executed it can generate additional revenues, support product demand and enhance customer satisfaction. With collaborative strategies and metrics, reverse logistics should form an integral part of the larger product lifecycle strategies and can serve as a foundation for increasing marketshare. ACCORDING to the Reverse Logistics Executive Council, reverse logistics is the process of moving goods from their typical final destination to another point for the purpose of capturing value otherwise unavailable, or for their proper disposal. Going further, an in-depth explanation of reverse logistics can be derived after an analysis of the following reverse logistics activities: • Handling of returned merchandise – Damaged – Seasonal inventory – Refurbish and resell via alternative outlet – Salvage of outdated products – Stock–balancing returns – Obsolete goods disposition – Asset recovery.
16 • SMART LOGISTICS • JUNE 2010
• Recycling and reuse – Material reuse – De-manufacturing – E-Waste recycling – Hazardous materials disposition. From the aforementioned activities, Rogers and Tibben-Lembke define reverse logistics as, “Process of planning, implementing and controlling the efficient, cost-effective flow of raw materials, in-
process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.” With increasing momentum of these activities in the current scenario, a recent Aberdeen Group report titled, Revisiting Reverse Logistics in the Customer-Centric Service Chain, reveals that reverse logistics is rapidly emerging
Expected Reverse Logistics Growth in India • 3 per cent of the Indian GDP is lost to supply chain inefficiencies • 57 per cent of the Indian firms are expected to outsource reverse logistics in the next five years • The Ministry of Environment and Forests has mandated electronic hardware manufacturers liable for pick up and proper disposal.
as a core driver of competitive advantage and financial performance among leading manufacturers. This form of logistics is also gaining a foothold in India. If reverse logistics is viewed as a backward supply chain network moving products from end-consumer back to the manufacturer for reuse, disposal or surplus sale, and aiming to optimise a full circle efficiency, India’s geography might pose a challenge but critical mass volumes will definitely ensure the success of reverse logistics in the country. However, success of reverse logistics also depends on reverse supply chain management in India. In developed countries, it is typically outsourced to experts permitting the producer to focus on core competencies and increasing shareholder value.
KEY GROWTH DRIVERS OF REVERSE LOGISTICS IN INDIA India has a long road to haul as it relates to supply chain efficiencies. Estimates suggest that 3 per cent of its GDP or approximately Rs 42 billion is lost to such inefficiencies and low compliance with the government’s e-waste regulations. However, India’s reverse logistics could be a $10-$15 billion industry, as firms realise that outsourcing can help them focus on overall shareholder value. Economic drivers Given the increased emphasis on improving profitability and social responsibility, firms seek reverse logistics for returns management efficiencies and critical strategic value from players, who are acquainted with core operations and can configure to the right reverse logistics solution. For example, the Future Group experiences 3-4 per cent of all goods returned, but the matured US market experiences an average of 10 per cent, with reverse logistics costs estimated at 4 per cent of total logistics costs. Reliance Venture Asset Management put the Indian reverse logistics market value at an estimated Rs 54,000 to Rs 72000 crore, and according to a study by d’Essence Consulting, in the next five years, nearly 57 per cent of Indian firms are expected to outsource reverse logistics. Regulatory drivers The stringent e-waste disposal mandate of the Ministry of Environment and Forests, for making product manufacturers liable for safe disposal procedures
Client Interface
Lowest Cost Routing
Pick Up
Transport
Lowest Cost Handling
Receive
Inspect
Value Creation
Sort
Dispose
IT Platform: MIS, Tracking, Client SOPs, Process Rules, EDI
Scrap
Recycle
Re-Sell
Re-Stock
Repair
Refurbish
Figure 1: Primary steps in managing returns and recycles
of e-waste exacerbates producers returns management responsibilities. It necessitates the concerted efforts of a certified recycler and a professional logistics provider to solve the challenges. According to C J Charlton, studies show that returned merchandise costs the consumer electronics industry $10 billion annually, while personal computer returns amount to $1.5 billion per year. Going by this study, it can be estimated that India’s 350 million middle-income consumers wanting higher quality electronics & electrical appliances will lead to rapid rise in the demand for reverse logistics. However, this demand can be effectively captured, only when companies eliminate challenges that threaten the value delivery in reverse logistics.
that interrupt these processes are: • Retailer vs producer issues – One difficulty in managing returns is the difference of opinion between producers and retailers as to the condition and value of the item, and the time factor associated with the return of the product. The producer and retailer thus need to develop a working partnership and process understanding often with an intermediary, facilitating the set of mutually agreed procedures and enlisting various return obstacles. Other return obstacles include inbound returns outnumbering outbound disposals creating the need to stack high volumes of returned goods in warehouses. This is compounded
Efficient ways of e-waste collection • Dedicated service – Vehicles, warehouses, managers exclusive to one goods producer • Shared service – Groups of similar goods suppliers share cost. • Specialised service – The nature of the goods demand a particular type of vehicle • Multi-client distribution – Regional logistics services provided for any number of clients • Transit only – The LSP performs deliveries only with minimal in-transit warehousing • Co-operative – Typically, the LSP, client and recycler pool resources • Occasional use – Case-by-case distribution and returns management.
COMMON REVERSE LOGISTICS CHALLENGES Creating planned reverse logistics value and the right set of economics depends significantly upon upstream processes working correctly. Few of the challenges
by some unidentifiable goods or products that are unauthorised by the producer as legitimate returns. These conditions translate into the need for better reverse logistics management including quality data collection and
JUNE 2010 • SMART LOGISTICS • 17
Reverse logistics, continued
W Recycling W W W
W
Distribution Consumer
Manufacturing
Supply
Retail
Remanufacturing/ Re-use W
W
W Collection
Legend: W Waste (or disposed) materials
Figure 2: Extended supply chain, considering waste and return goods
visibility. Process controls, systems, technology, smart management and business partner collaboration can be designed and implemented in India. • Handling costs – Besides retailerproducer issues, handling costs and market location vary per item. On this note, Anshuman Singh, MD & CEO, Future Logistics Solution, states, “Average spending on reverse logistics is about 10-15 per cent for garment firms and about 20 per cent for furniture companies.” • Uniform returns programme –Another major obstacle for reverse logistics is a uniform returns programme. While a nation-wide VAT system will create avenues for reverse logistics efficiency including less cost regional distribution/collection, implementation is nearly a year away. However, with an estimated 80 per cent of Indian consumer demand in the mid-tolow order value goods range, a cost justified returns programme could be difficult to establish. • Variations in forward versus reverse logistics – Challenges are also posed because of the differences in the characteristics of forward versus reverse logistics. For example, forecasting, flow, optimum disposition and packaging can be relatively straightforward and uniform in forward logistics activities, whereas the same set of activities can be complex in reverse logistics tasks. If one extends the forward supply chain for returns management and e-
18 • SMART LOGISTICS • JUNE 2010
waste collection using the example flow shown in Figure 2, one will see that ewaste recyclers along with their logistics provider partners can set up efficient roundtrip collection runs in a number of different ways. These methods are as follows: • Dedicated service - vehicles, warehouses, managers exclusive to one goods producer • Shared service - groups of similar goods suppliers share cost.
deliveries only with minimal in-transit warehousing • Co-operative - typically, the LSP, client and recycler pool resources • Occasional use – case-by-case distribution and returns management. The focus is on creating multi-stop pick-ups and deliveries with back-loading, wherever possible in order to improve fleet utilisation, keep total transport costs low and minimise warehousing costs. In all scenarios, ‘hub-spoke’ operations for lowest cost long haul is a priority. • Long distance haulage versus short haul means higher transport cost and often in-transit warehousing for consolidation economics. The longer the return cycle time, the longer the ‘time-to-value’ and less customer satisfaction. Metros, tier 1, 2 and 3 cities each have their own set of economics, timeliness and service barriers. Lack of infrastructure (e.g. 50 per cent unpaved roads) or lack of electricity and communication facilities tend to be enablers or disablers in the reverse logistics chain. With over 70 per cent of India living in rural areas, it is difficult for manufacturers to meet the efficiencies needed to run reverse logistics and comply with government’s e-waste mandates without the threat of financial loss. • In an industry driven by the need to increase turnaround times, but thwarted
Key Reverse Logistics Challenges • Electronics goods pricing fluctuates requiring fast return mode handling • Retailers and vendors need to process returns at a high proficiency level for quick, efficient and cost-effective collection and return • Customer requirements also demand a high standard of service that includes accuracy and timeliness in the pickup and return process • The logistics company must shorten the link from return origination to the time of resell • Slow processing, high inventories, unauthorised returns, unknown cost, low customer repair confidence • Slow or incomplete data collection leads to process uncertainty • Makers must use product system designs that make recovery and reuse possible, efficient and profitable.
• Specialised service - the nature of the goods demand a particular type of vehicle • Multi-client distribution – regional logistics services provided for any number of clients • Transit only - the LSP performs
with logistics obstacles, it is difficult to set up efficient centralised return goods hubs for repair, replacement, refurbishing or disposal. They need to be configured with ‘best of breed’ resources, modelled for financial soundness and structured in a manner
that all participants collaborate and processes are overseen by experts. • There are a few hidden reverse logistics costs that the manufacturers must consider while managing returns. They are as follows: – Many reverse logistics costs–claim, processing, write-offs, freight charges and credit reconciliation are hidden from responsibility – No single department or executive owns the entire cost of poor reverse logistics and no one is held accountable for solving the problem – Need to separate reverse logistics functions from forward distribution and give the attention deserved without drawing from supply chain resources – What executives traditionally viewed as an annoyance is today not only a potential profit centre, but also a client service opportunity. Apart from the above, there are few challenges indicated by Halldórsson and Skjøtt-Larsen related to reverse flows. They are as follows: • Large variations in timing, quality and quantity of product returns forecast difficulties • Lack of formal procedures for product returns - unpacked products and poor ID • Delayed product returns causes reduction in market value especially for time-sensitive items • Lack of local competence in inspection, evaluation and disposition of returns - right partner • Risk of cannibalisation of market for new products - need controls and practices in place, • Lack of performance measurement of the efficiency of reverse logistics - lack of benchmarks.
SUCCESSFUL REVERSE LOGISTICS SERVICES PLANNING Adopting the reduce, recycle and reuse (3R) approach is the undisputed methodology for comprehensive coverage and eventual success in reverse logistics as it regards achieving necessary efficiency levels in reverse logistics. To effectively execute the 3R approach, following parameters must be considered:
Some important preparations that must be addressed when setting up a Reverse Logistics programme include: – Executive management buy in and championship – Clear management guidelines detailing returns management objectives – Adequate budgeting of funds and human resources
operations for returns and recycles, manufacturers must carry out disciplined planning to ensure that the operations not only deliver a reduction in the firm’s carbon footprint but also extend product lifecycles, bottomline profit improvements, and boost firm’s credibility and business image. Well-planned operations can then increase the value delivered through reverse logistics to the consumers.
Factory Gate Pricing (FGP) distribution channels
TECHNOLOGY The technology-planning component is fundamental to any efficiency objectives, for example, e-commerce facilitates open, real-time communications and data exchange, as it creates platform for order placement and marketing. The same website portals can be used to manage reverse logistics and improve client links and business relationship in a transparent and efficient manner.
EFFECTIVE IMPLEMENTATION PLANNING When setting up reverse logistics
with product, sales, operations, technology and logistics managers to construct the right reverse logistics strategy. This planning can then be improvised to include financial and marketing objectives in order to arrive at a sound business plan versus just a stand-alone logistics operation. The life of the product can then be extended significantly with a commitment to reverse logistics initiatives. A returns and recycles reverse logistics
The stepping stones to implementation cannot be ignored. It is essential to interact
plan should clearly layout a strategic path to success that embraces all the practices of the firm and their partners for complete control over core reverse logistics activities. Such planning will enable manufacturers to realise the best cost-to-value reverse logistics solutions for fewer disposed products, alternative uses of resources derived from extending product lifecycles and highly efficient & comprehensive e-waste recycling. L Sanford, Director, Applied Logistics India and Rohan Gupta, COO, Attero Recycling E-mail: lloyd.sanford@sekogln.com
JUNE 2010 • SMART LOGISTICS • 19
INSIGHTS & OUTLOOK
REVERSE LOGISTICS
TRANSPORTATION
TURNING OPERATIONS
GREEN
Transportation comprises a major component of reverse logistics, which adds to more possibilities of environmental pollution, increased carbon footprint and so on. In order to tackle these areas of concern, reverse logistics providers should turn towards environment-friendly transportation operations and ensure that fleets and miles travelled in the reverse supply chain are green.
20 • SMART LOGISTICS • JUNE 2010
BEING client focussed and responsive to client demands, traditional logistics has always worked towards improving forward distribution, transportation, warehousing, packaging and inventory management. However, in the early 1990s, economic, regulatory and consumer pressures shifted the focus of the industry to environmental issues, opening up new markets for recycling and disposal, and creating a demand for reverse distribution primarily around collecting waste, and used goods & materials. Today, concerns about environmental issues, sustainable development and legal regulations have made organisations responsive to reverse logistics. This scenario has led the industry to switch from its traditional detached approach towards environment to an integrated view of ‘logistics’ and ‘green’. These approaches are elaborated below: • The traditional approach: Ecofriendly manufacturing, transportation, distribution to meet minimal standards • The new green logistics wave: Cut costs and manufacture products with a longer shelf life. In addition, incorporate plans for smarter returns management for product repair and refurbishment, recycling of goods & materials and proper disposal. ‘Going green’ is a natural by-product of smart return logistics. It is feasible to cut out inefficient returns processes that result in unnecessary transportation and by doing so reduce carbon emissions while improving air quality. With efficient handling, refurbishment and quick positioning to aftermarkets, manufacturers can wait longer to produce new products, and thus reduce their carbon footprint.
ACT
‘Going green’ is a natural by-product of smart return logistics. It is feasible to cut out inefficient returns processes that result in unnecessary transportation and by doing so reduce carbon emissions while improving air quality. With efficient handling, refurbishment and quick positioning to aftermarkets, manufacturers can wait longer to produce new products, and thus reduce their carbon footprint. waste collection over shortest distances. Also, logistics service providers (LSPs) can undertake select pickups in repeat returns supply points–their own facilities, boutique or even major retail stores, government or institutional locations– and then run loads through ‘hub-spoke’ networks for consolidation and maximum tonnes moved per kilometre. Corporations that are waste electrical and electronic equipment (WEEE) producers are showing increased social responsibility with willingness to pay a reasonable fee for the movement of e-waste from their corporate offices to a certified recycling plant. Smart technologies–online pick up booking, RFID labelling, in-transit tracking, load & route optimisation, and EDI–across the logistics operations will also drive sustainability with more precise planning, accountability and a trusted way to manage product ownership, costs, valuation and remuneration schemes. Improperly handled returns reduce net profits by 35 per cent, note Gartner Research analysts. So it pays to get
ADOPTING DEMAND CHAIN TACTICS If one looks at the primary and secondary distribution flow diagram, it can be seen that driving cost reductions for both forward and reverse logistics while increasing pickup and delivery reliability can be a conflicting exercise. However when the focus is on optimising inventory, adherence to performance standards and true supply chain waste extraction, it is possible to have the best of both worlds as long as turn-times are reasonably predictable. Enforcing turn-times takes all supply chain parties setting down and agreeing upon a reverse logistics standard operating procedures (SOP) that governs participant
Manufacturer
Primary
ACHIEVING GREEN RESULTS IN TRANSPORT OPERATIONS For increasing efficiency of returns processes, it is important to improve logistics operations, especially transportation. Transportation comprises a major component of reverse logistics. As with forward logistics, the execution of reverse logistics transports large volumes of cargo, and thus carries the environmental risks of pollution, emissions and increased carbon footprint. How then do we transport returns in the lowest cost, employing the most ‘green’ method? One method is to strategically place collection centres for optimum e-
reverse logistics right. They also report, “Automating reverse logistics with a web interface that demands a return material authorisation (RMA) and compliant label before any return, for example, can save 50 to 70 per cent over a live call centre.”
Nominated Consolidator
Primary Distribution Centre
Regional Distribution Centre
Regional Distribution Centre
Secondary Wholesale / cash & carry / caterer
Multiple retailer outlet
Independent retail outlet
Catering outlet
Figure 1: Distribution channels (Source: McKinnon, 1999)
JUNE 2010 • SMART LOGISTICS • 21
Reverse logistics, continued
Returns Management Tasks Supported by e-Commerce Applications • • • • • • • • • • • • • • • •
Advertisement of available used products, parts or material Notification of used products, parts or material, currently sought Search for suppliers/customers Making purchasing commitments Receive information of expected delivery Purchasing Responding to request for used products, parts or materials Price setting (i.e. fixed, negotiations, auction) Order processing Tracking and tracing orders Sales Customer invoicing, collection and payment Product tracking Customer support Post sales/service Customer/product monitoring.
• Public relations benefits and new public e-waste awareness of viable solutions • Offers two-way value-added activities (inspection, validation, packaging, semiprocessing).
SCHEDULED PICK UP AND UNLOADING TIMES As mentioned afore, turn-time adherence is critical for reverse logistics and necessitates predictable dock scheduling. In the typical average logistics pickup and delivery time chart (fig. 2), groceries in this example, it takes tight planning and cooperation for delivering and returning goods in the same vehicle across multiple sites in the same zone. These timings are not representative of real returns timings of e-waste in India, it is just used to
Green logistics KPIs activity and drives predictable dock pick-up and delivery times, expected product type and quantities made available for pickup and expected transit times between transfer points. While a collaborative effort works, it takes constant management attention. Therefore, it is essential to employ the services of a seasoned third party provider, who understands forward, reverse and recycling at every stage of the returns process. Some advantages of using demand chain tactics are: • Environmental cost benefits with more efficient and less urban area transport
• Precise planning and decision-making in the logistics operation • Improved inventory management, product availability in both directions and customer service • Better chance of adhering to new ewaste policies and regulations • Outsourced logistics functions to costeffective operators for reduced first and last mile landed cost • Enhanced customer service with better communications and service quality • Potential for shared resource costs across multiple modes and asset owners
Idle (empty and stationary) 21%
Running on-the-road 35%
Maintenance /repair 6%
• • • • • • • • • • •
Sustainability Flexibility Mobility Efficiency Environmental Impact Traffic Congestion Avoidance Security Safety Energy Use Facilities Use Labour Use.
illustrate all the components one must consider to accurately gauge dock load/ unload and road transit times. In order to be effective across the type of disposition flow shown in figure 1, firms need to look closely at how they can avail of fully integrated operations, utilising all key partners in order to get the best economical performance for reverse logistics and expected ‘green’ results.
INFORMATION TECHNOLOGYBASED GREEN LOGISTICS Delayed or otherwise loaded and inactive 4%
Pre-load, awaiting departure 12%
Loading / unloading 16%
Figure 2: Average time utilisation in grocery distribution (Source: Fernie and McKinnon, 2003)
22 • SMART LOGISTICS • JUNE 2010
On-the-road daily rest 6%
The right information technology is essential for low cost efficiency and quality services plus tight compliance with ‘green’ related practices. In the US, industrialgrade returns add up to more than $50 billion a year and most have never been used, are not in need of repair, and are available for immediate resale. A huge task in reverse logistics planning is managing the uncertainty of such non-standard
returns. The right information technology is an integral component for this task and today’s web technology and e-commerce offer quick, easy-to-use and low-cost methodologies for orchestrating efficient returns management and driving visibility. Implementation of IT in reverse logistics will provide the following benefits: • Reduced returns – Increased accuracy of forward logistics delivering right products • Returns clarity – Online requests with complete product data • Partner participation – Close collaboration with recycler and LSP • Collection centre visibility – Checking in-transit volume flows and bottlenecks for planning. Apart from the above, there are four basic paradoxes for achieving green logistics in transport operations. They are elaborated as follows: Costs Cost-saving strategies pursued by logistics operators are often at variance with environmental considerations, and the environment assumes a variety of burdens and costs. Time / Speed In logistics, time is often the essence for attaining success. However, speed in the distribution system for efficiency is often achieved by using the most polluting and least energy-efficient transport modes. Reliability At the heart of logistics is service reliability and on time delivery, thus use of the most reliable modes. But, generally, the least polluting modes are regarded as being the least reliable–ships and rail versus air and truck, the two least environment-friendly modes. Warehousing Modern logistics economies are based on the reduction of stored inventories. Inventories are transferred, to a certain degree, to the transport system, especially truck, contributing further to congestion and pollution. E-commerce For online retail customers fast and secure delivery is paramount, and the distribution online transactions may consume more energy than other retail activities. However, pooled transport–website bids for using transport capacities that would have otherwise been empty during return–is considered ‘green’. So once again, the situation may be seen as paradoxical. So, how green is logistics when the
ACT
If India steps up and accepts responsibility for ensuring that green logistics and the safe disposition of e-waste is in the forefront of the government initiatives as well as day-to-day activities of the citizens, there could be tremendous headway in establishing a green chain. There is no simple roll out of the needed reverse logistic systems. It takes significant collaboration across multiple supply chain links to create a winwin green logistics solution. consequences of its application, even if efficient and cost-effective, have led to solutions that may not be environmentally appropriate? The transportation industry itself does not present a greener face, indeed in a literal sense reverse logistics adds further to the traffic load. The manufacturers and domestic waste producers are the ones achieving the environmental credit. It is not a question of whether or not the logistics industry will have to present a greener face. Pressures are mounting from a number of directions, thereby increasing environmental concerns. In some sectors
It takes significant collaboration across multiple supply chain links to create a winwin green logistics solution. Electronics are a huge source of ewaste and today consumers are often willing to pay slightly more for products with labels of companies demonstrating environmental responsibility, and both product manufacturing and delivery can benefit from green logistics. Better raw material sourcing methods, reduced packaging, shipment consolidations, using lower cost fuel vehicles and better routing for lowest total landed cost delivery are a few green logistics
What can producers expect from green logistics? • Eliminate inefficient returns processes that result in unnecessary transportation moves and reduce carbon emissions while improving air quality • Wait longer to produce new products and thus reduce carbon footprint • See both a monetary and public image benefit • Efficiently handle returns and damaged or obsolete goods at minimum cost • Refurbish and sell an electronics device within 70 to 80 per cent of the original cost • Cut inventory costs and have products with a longer shelf life • Reduce transport emissions,142MTs, approximately 7.5 per cent of India’s total emissions. this the but can
is already manifest, in others, such as logistics industry, it is lagging behind poised to catch up, if the paradoxes be overcome.
INDIA’S GREEN LOGISTICS FUTURE – MAKING IT POSSIBLE If all India steps up and accepts responsibility for ensuring that green logistics and the safe disposition of e-waste is in the forefront of the government initiatives as well as dayto-day activities of the citizens, there could be tremendous headway in establishing a green chain. There is no simple roll out of the needed reverse logistic systems.
initiatives that can strengthen the green logistics chain. Going forward, while citizens and government support accelerate green initiatives, there is a need to promote a regional approach to green logistics. In light of the logistics challenges, firms across India need to be persistent, stay focussed and take meaningful and measurable steps to make the future of green logistics promising in India. L Sanford, Director, Applied Logistics India and Rohan Gupta, COO, Attero Recycling E-mail: lloyd.sanford@sekogln.com
JUNE 2010 • SMART LOGISTICS • 23
INSIGHTS & OUTLOOK
GREEN LOGISTICS
“The greening of supply chain cannot be done by industry, government or the logistics industry individually. There needs to be a balanced approach by all stakeholders,” asserts Lenny Koh, DirectorLogistics & Supply Chain Research Centre, The University of Sheffield, UK, during an interaction with Rachita Jha. Excerpts...
‘A BALANCED GREEN SUPPLY CHAIN IS THE NEXT GENERATION SUPPLY CHAIN CHAIN’’ 24 • SMART LOGISTICS • JUNE 2010
COMBATING CARBON EMISSIONS Even if carbon dioxide emissions were to cease immediately, the climate change phenomenon will continue for the next 50-100 years. Climate change will have a direct impact on human well-being and quality of life. Taking the case of China, one of the leading emitters of CO2, the country has decided to set up a target for reducing carbon intensity by 40-45 per cent by 2020. This implies reducing the amount of carbon produced per unit of economic output. Even as China registers significant growth rate, surely its emissions are going to be higher. Hence, instead of reducing emissions, the developing countries can target carbon intensity to begin with the journey of going green–this includes greening of the supply chain.
GREENING SUPPLY CHAIN Currently, we have an unsustainable supply of energy and its cost is very high. Moreover, there is a need to reduce our carbon footprint and carbon intensity. The countries now need to take urgent action for establishing a green logistics sector depending on resources, competency, skills, infrastructure and new business models through co-operation and partnerships that will be pillars of success to realise the new path of growth. This new business thinking can be applied across various levels within the supply chain to decrease the carbon footprint and dependence on nonrenewable sources of energy. Moreover, as Indian businesses are taking advantage of the growing economy and encouraging adoption of new business models, a green supply chain is much needed in the overall business thinking to leapfrog into the green economy. It is now time for the global community to include green supply chain ecosystem in its industrial economy.
remains to be the balanced and next generation supply chain that takes on a holistic systemic view of logistics.
BALANCED GREEN SUPPLY CHAIN This concept has gained importance with the current need for business to be green, with a sustainable business model. It is not just about identifying the hotspots and reducing the carbon footprint, it also calls for companies and logistics service providers to identify the best kinds of interventions or combinatorial solutions for a balanced green supply chain. This combination will take into consideration the economic, social, environmental and cultural impact to get the right combination together. The greening of supply chain cannot be done by industry, government or the logistics industry individually. There needs to be a balanced approach by all concerned stakeholders.
CHALLENGE OF THE BALANCE At the moment, different stakeholders in the supply chain will have different objectives and these may be complementary or contradictory to each other. This remains the major challenge for supply chain management. The balanced view demands economic, social and environmental parameters to be considered in parallel. Location issue needs to be taken into consideration. In addition, the internal dynamics between the various stakeholders need to be recognised and addressed. We need to build the green supply chain system in accordance to the demand and supply readiness for such systems. Greening the global supply chain is not easy and conflicting goals hinder the success of a green system in the logistics sector. A new multi-disciplinary approach is needed to achieve the overall objectives of green supply chain.
SUPPLY CHAIN TRANSFORMATION The supply chain has gone through many phases of transformation. It began from the classical and linear supply chain, which later became dynamic and responsive, and with new players coming into the sector it moulded into a collaborative and relationship-based supply chain. This was until the onset of environment movement that led to the advent of green and lowcarbon supply chain. The latest and most evolved format
LEADING THE GREEN MOVEMENT As India is a global supplier of a wide range of products, it plays a significant role in the global supply chain. There is already a pressure on the industry to incorporate environment-friendly solutions due to regulations, costs, customer commitments, etc. So green logistics has made its advent in India, and hence the country needs to make efforts and get set for the green future ahead.
India needs to first realise the importance of supply chain links with a systemic view. And, there is a need to recognise the importance of green supply chain in the Indian context. Moreover, the awareness needs to be at all levels right from suppliers, manufacturers, consumers, government, and educational institutions in a holistic way. This reflects the supply and demand readiness of green supply chain systems that will pave the way for the development of a balanced green supply chain.
KEY FOCUS AREAS For any developing country that aims to green its supply chain network, increasing the awareness and understanding the impact of a green supply chain should be a priority. This would strengthen the demand readiness of countries like India and would make way for supply readiness of green solution for the logistics industry. The preparedness of any developing country towards establishing a green supply chain is the second most important criteria. With good leadership from the government–policies, investments and regulations–the strategic importance of green supply chain to the overall economy can be easily realised. The third aspect remains of inculcating skills for working in a low-carbon economy or a green supply chain. Therefore, the education community needs to introduce these concepts and undertake training and research on these topics. Technological innovations are going to be critical tools in guiding the success of green supply chain networks in India, as technology is a core competency for the country and we can leverage these knowledge solutions effectively.
COLLABORATIVE APPROACH TO SUCCESS Considering that there is an urban India and a rural India, localisation has immense importance in terms of success of the supply chain initiative. The greening of supply chain strongly considers the adaptability of supply chain. There has to be an interconnectivity and adaptability between the two models to be successful. The future definitely indicates towards a low carbon trend – green and sustainable. Thus, green supply chain should now be built in the valuechain system of the overall economy.
JUNE 2010 • SMART LOGISTICS • 25
VIEW FROM THE TOP PRESIDENT, CHEP INDIA
3PLss 3PL
GLOBAL WILL PLAY A MAJOR ROLE IN DEFINING THE OF THE COUNTRY
SUPPLY CHAIN DYNAMICS “In an increasingly complex global marketplace, companies must excel in customer, product and people management. The ability to have enough flexibility within your own operating infrastructure to adapt to different forces in the marketplace is the key,” asserts Pranil Vadgama, President, CHEP India, during an interview with Prerna Sharma. Excerpts…
26 • SMART LOGISTICS • JUNE 2010
EVALUATION OF LOGISTICS INDUSTRY IN INDIA AND THE POTENTIAL OF POOLING EQUIPMENT The logistics industry in India is currently undergoing a metamorphosis. The focus is shifting from India being a global service hub to being a leading manufacturing centre. The major challenge for India will be pertaining to the issues related to inter-linking of its roadways, railways and waterways for facilitating multi-modal operations. Today and going forward, there is a vital emphasis on cost of services and speed-to-market for the delivery of time-dependent ‘perishable’ goods with minimum damage to product & equipment. Loss of sales opportunity due to non-availability of goods affects the bottomlines of most organisations. Hence, more controls are applied to stocking levels at the point of sale, leading to an increasing demand for time-bound deliveries. When it comes to pooling equipment, CHEP owned pallets and crates (equipment) pooling model plays a crucial role in ensuring that organisations deploy capital into their core businesses. Palletised goods movement ensures substantial time and cost savings, minimises damage ratios and enhances resource utilisation, bringing in efficiencies and enhancing effectiveness in the entire supply chain.
ENSURING SUPPLY CHAIN OPTIMISATION Customer demands for more reliable, seamless supply chain solutions that offer real-time visibility along the pipeline has drastically increased. Globally, the key driver of demand for world-class logistics services is a critical mass of organisations, whose bottomline success depends on low-cost manufacturing locations connected to highly efficient supply lines, more so, in these tough times. Added to this is the lack of capabilities or competition in some segments of the supply chain, absence of common standards for equipment and technology, and intra-provincial barriers. Broadly, the elements of integrated supply chain include supply chain management design; international and domestic transportation; consolidation/ distribution; warehousing/distribution
centres (DCs); and delivery to point-ofsale. CHEP adds value to services through standardisation. It optimises the use of material handling and other equipment, racking systems, and transportation & human resources. Standardisation reduces investments and enhances the capabilities throughout the supply chain.
CRUCIAL ROLE OF TECHNOLOGY IN LOGISTICS MANAGEMENT There is an ever-increasing demand for real-time visibility throughout the supply chain network, and hence the role of technology-driven applications becomes critical. On-line tracking systems, barcoding systems, latest RFID technology and different Internet applications are being extensively used by service organisations. Traditionally, technology spends were classified as cost of services. However, now there is a paradigm shift in this perception. Today, technology is a value-added critical asset, which is at the centre of the business survival strategy of many service organisations.
equipment damage. The benefits from palletised loads are realised throughout the entire facility and other segments of the logistics supply chain. CHEP has a strong leadership position in the global palletised goods movement category. CHEP’s equipment meets global standards and enhance value for their customers by reducing damage to goods & equipment, thereby saving on time & costs, besides being environment-friendly as well.
CORE ACTIVITIES OF CHEP INDIA AND THE VOLUME OF BUSINESS YOU DO IN INDIA VIS-À-VIS OTHER COUNTRIES CHEP is a $4-billion global leader in pallet and container pooling services. Supplying a range of pallets, plastic crates, systems & support services, we help our customers around the world to store & distribute their goods efficiently. We are part of Brambles, a well-established international company providing business support services in nearly 50 countries across six continents. Brambles’ global reach, financial stability, and expertise in providing outsourcing services enable
One of the biggest emerging opportunities in the logistics sector will be defined by the scrapping of the inter-state tax regime. There will be a sea change in the domestic distribution landscape, resulting from a neutralisation of inter-state taxes. CHEP, for instance, has adopted technology in a big way. Equipment is tracked throughout the entire cycle of the supply chain using web-based applications. In addition, RFID technology has been deployed in other parts of CHEP’s global businesses.
SIGNIFICANCE OF PALLETS VIS-À-VIS GLOBAL LOGISTICS INDUSTRY Globally, goods movement is palletised in order to reduce in-house product transportation costs; move products on schedule and maximise the product transportation concept load-carrying surface (vehicle) trips. Products are palletised at the point of manufacture, enabling movement of goods with the fewest possible number of trips, in the shortest time, with the greatest amount of product load, and minimal product &
one to reduce capital expenditure and overall costs. Each year, CHEP saves global companies millions in supply chain costs by supplying pooled pallets and crates to facilitate the flow of raw materials & finished goods throughout the supply chain, and by promoting standardisation within the FMCG & automotive industries. After over 50 years of providing these services in Australia, Europe, the USA, Canada, Africa, Latin America, and parts of Asia, CHEP India was launched in June 2008 and is now scaling new heights in the country. In India, we are involved in giving advice throughout the supply chain on handling, storage and logistics efficiencies. Our systems enable quick identification of movement of materials from point A to B to enable quick and on-line reconciliation.
JUNE 2010 • SMART LOGISTICS • 27
View from the top, continued
CHEP plays a fundamental role (especially in emerging markets) by bringing best-in-class processes and procedures to various industries on eliminating inefficiencies in supply chains. This is our core competency.
SMART STRATEGIES IMPLEMENTED TO GROW YOUR MARKETSHARE IN THE INDIAN SUB-CONTINENT CHEP India is currently focussing on the FMCG and auto industries. Our strategy is similar to those in other regions where we have progressed–drive standardisation throughout the industry by working and engaging with key entities throughout the supply chains in these industrial sectors– thus enabling the benefits to be shared amongst all participating companies in equipment pooling. We are in continuous discussions with FMCG companies, retailers, 3PLs, OEMs, component suppliers, racking manufacturers, and MHE equipment suppliers to attain this goal.
landscape, resulting from a neutralisation of inter-state taxes. Currently, there is little by way of cutting-edge and competitive logistics services, and quality DCs capable of valueaddition. Moreover, transport services remain fragmented. On the positive side, there are significant investments being pumped into new and improved infrastructure – the Golden Quadrilateral project, airports, terminal expansion, etc. India’s soon-to-be-expanded national highway network, improved efficiencies in rail cargo network will further boost the logistics scenario in India. The national tax regime that has been planned for the next year will bring changes in terms of network designs for companies distributing in India. However, there will be a need for larger DCs and many more warehouse facilities mostly operated by transport companies or clearing and forwarding agents. Secondly, the consolidation of smaller warehouses means transport companies will begin to take advantage of the pan-India coverage that will
Palletised goods movement ensures substantial time and cost savings, minimises damage ratios and enhances resource utilisation, bringing in efficiencies and enhancing effectiveness in the entire supply chain. INITIATIVES THAT HELPED YOU GROW EXPONENTIALLY IN TOUGH TIMES Our value proposition is simple, and therefore, easy to communicate and understand. It is becoming difficult to secure capital day by day. Our value proposition enables many companies to get rid of this bottleneck and outsource equipment management to CHEP, thereby reducing their OPEX as well as CAPEX, which they can redirect to other activities. The fact is that our value proposition becomes even stronger to our customers in the current economic climate.
EMERGING OPPORTUNITIES & TRENDS IN THIS SPACE One of the biggest emerging opportunities will be defined by the scrapping of the inter-state tax regime. There will be a sea change in the domestic distribution
28 • SMART LOGISTICS • JUNE 2010
become possible. The consolidation will happen through mergers & acquisitions in this space. In future, suppliers and manufacturers will pick out the most central and convenient warehouses/DCs for their needs as opposed to having one in each state/location, thereby deriving economies of scale. This consolidation will see a huge requirement for pooled equipment, mechanised material handling equipment and racking systems. Capacities of transport vehicles will increase and will be augmented by improved infrastructure. Large global 3PLs will play a major role in defining the supply chain dynamics of the country.
MANTRA TO EXCEL IN THE GLOBAL MARKETPLACE In an increasingly complex global marketplace, companies must excel in customer, product and people
management. The ability to have enough flexibility within your own operating infrastructure to adapt to different forces in the marketplace is the key. We, at CHEP India, are building our business model alongside these lines to ensure that we always offer the best value to our customers, hire and retain the best talent, and continually innovate our services & product offerings.
ROLE OF CHEP IN ENSURING EFFICIENT MATERIAL MOVEMENT CHEP brings in the global concept of pooling standard equipment across the entire supply chain. Palletised loads will not only ensure efficient material movement but will also add value in terms of saving in time and costs. Standardisation will ensure optimisation of transport facilities, material handling equipment and racking systems. Service users will benefit from enhanced resource utilisation, lower capital expenditure and minimal product damage. CHEP Crates ensure that materials move efficiently and effectively by reducing packaging costs, minimising product damage, lowering equipment loss rates, and optimising transport utilisation, thereby adding millions to the customer bottomlines. CHEP has been involved in moving materials efficiently throughout supply chains across the world over the last 50 plus years. It is our processes, systems and people that enable us to do so.
FACTORS DRIVING THE GROWTH OF THIS INDUSTRY Government policies such as the removal of CST, standardisation of truck bodies, and other key infrastructure elements such as racking, etc, would go a long way in providing a definite direction to the industry. However, what I believe as the most fundamental factor is the mindset of the Indian industry. From our experience in engaging and working with many of the major companies here, it can be said that there is a general desire to improve. There is a keen sense of wanting to try something new and different to continuously reach new heights. India compared to many other regions is ready for a supply chain revolution…and CHEP India wants to be at the forefront and catalyst of this change.
DEMAND TRENDS
ONE Q, MANY VIEWS
ENTERING NEW
GROWTH AVENUES India’s logistics service providers (LSPs) are expanding their offerings and networks to cater to a growing clientele in different segments and geographies. Buoyed by the economic boom, these providers are ramping-up their capacities to enter into new growth avenues. Here are the initiatives taken by the LSPs to cater to the demand trends emerging globally... AYESHA AUGUSTINE IN order to stay ahead in the competition, many logistic companies have chosen to expand on a large scale. While some companies plan to keep it simple by focussing on their customer service solutions that could help them in their supply chain management, many others plan to expand their range of offerings and invest in transportation and ancillary services, so that they could cash in on global opportunities. One of the recent reports projected that the country would witness a growth of over 7.2 per cent in the year to March 2010. However, the logistics sector is striving to reach its recent past GDP rate of nine per cent. This would hugely benefit the 3PL segment, which, going by trade estimates, is growing at 20-25 per cent annually. This could also positively pave way to more third party companies following the expansion surge. Although the current market scenario of 3PL services cannot be compared with that of developed markets in Japan and the US, where there is tremendous scope for growth, many industry players will be heading towards mergers and acquisitions (M&A) and alliances with small local players for sustenance in the market. This would add value to their supply chain. The increasing focus on core business activities will result in 20 per cent CAGR growth in the Indian 3PL industry during 2009-2012. Added to this, the focus on aftermarket service logistics will further increase the demand for ready-to- use facilities, expanded supply chain network and innovative service offerings. Integrated warehousing is another agenda that many 3PL companies will seek in future. In sequence to the emerging growth prospects, Smart Logistics, spoke to a few logistics companies about their ramp up plans to meet their customer demands. Here are their views…
30 • SMART LOGISTICS • JUNE 2010
Companies in India until now have been providing only limited services, forcing their clients to contact multiple parties across various locations to meet their logistics needs. This is exactly where TNT’s USP comes to force. With recent success in service logistics segment, TNT India would like to be the pioneer in providing innovative solutions that will meet the growing supply chain demands. Therefore, the company has invested in the following: Investment in people: We have made huge investments to ensure that we have the required skills, experience and knowledge to manage intelligent supply chain business. In addition to intensive training, we have also hired good quality supply chain professionals. Ready-to-use multi-client facility: Our approach is to build multi-user facilities that will accommodate multiple clients and common resources. These facilities are built at strategic locations in the same building as our current operations, across the country. As of now, we have built over 150 forward stock locations ( FSLs). Technology: To manage the exponential growth, we have made investments in implementing technology to manage the storage business. In March, we established a control tower at Delhi to manage FSLs through TNT’s SDS Warehouse management software.
ABHIK MITRA, MD, TNT India
We believe that investments in people, facilities and technology will help us support the exponential business growth. These investments can be elaborated under the following categories: • Acquiring and extending supply chain domain knowledge to clients in select industry verticals.: Our cumulative experience will help us navigate the pitfalls of outsourcing and improve outcomes of supply chain implementation. We are ready to offer practical and affordable supply chain network modelling solutions. • Re-locating, up-sizing and outfitting warehouses and DCs in the country: Each warehouse and DC is connected to our hub-and-spoke transportation network for efficient distribution. All facilities are chosen as per size, cost, design, accessibility and delivery capability of the operations. AFL’s multi-user and dedicated facilities will offer scalability and unique pricing options for the right service levels. • Upgrading Information Technology backbone and improving our clients’ experience in information visibility: Full information traceability and visibility is ensured through our WMS and TMS. Our systems are EDI and RFID enabled. We will bolt-on new applications to handle requirements such as warranty parts logistics, returns servicing, promotions management, etc.
CYRUS GUZDER, Chairman & MD, AFL
Our plans include mechanised iron ore terminals at Ennore (12-mn TPA annual handling capacity) and New Mangalore (8 mn TPA). The modern bulk terminals are being set up as BOT projects on the PPP model. For our pan-India container train operations, acquisition of another 9 rakes over three years will add to the strength of our current capacity of 6 rakes. In addition, CFS/ICDs at Mumbai and Delhi also to our current CFSs at Chennai, Tuticorin, and Visakhapatnam. We will be launching freight-forwarding solutions in 2010-11. With freight forwarding coming into our service portfolio, our value proposition will be fully integrated, end-to-end, and complete.
LR SRIDHAR, MD, Sical Logistics
India is one of the fastest growing economies and a strategic market for DHL. We have invested extensively in the Asia-Pacific and India. We are also investing in infrastructure and people including transfer of knowledge, thereby providing greater efficiency to India’s logistics market. India will soon see the advent of GST and this will spark rising demands from supply chains. Its implementation will change the way supply chains are operated by most companies in the country and it will bring upon the need to establish larger and more integrated warehousing operations and end-to-end solutions in the next few years. These, in turn, will require more advanced IT solutions, larger and enhanced infrastructures along with better-trained staff – both blue and white collar.
VIKAS ANAND, Director–Operations, DHL Supply Chain India
BLR believes that it has to deliver value to its customers by integrating innovation into its solutions. We have to get efficiencies in transportation and we can do this only if we study the business of our customer. Before starting work for a new customer, the company executives visit the plant as well as the loading/unloading point to get a complete understanding of the requirements and to provide a solution, which will best fit the business needs of the client. In our international freight management business, we have introduced innovations to provide door-to-door as opposed to portto-port solutions to customers. Not only this, we offer solutions by integrating our capabilities in the road transportation, bonded trucking and bonded warehousing space to provide advantages of time and cost to its customers. Customers want to implement Just-In-Time concepts in their inventory management and only those logistics companies, which are multi-modal and multi-dimensional in their service offerings can survive in the long run.
ASHOK GOYAL, MD, BLR India
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Demand trends, continued
Blue Dart strives to be a customer-centric organisation. Every step it takes is an effort to strengthen this relationship. We have robust plans to further dominate the market through innovative products and services, aggressive customer acquisitions and enhanced customer loyalty. Blue Dart has geared-up for launching products & services relevant to customers’ needs. Regular monitoring of the market, customer feedback, market research and analysis continuously provides us with the insights for developing more innovative solutions that benefit the end-consumer enormously. The new initiatives by Blue Dart includes upgradation of its product range while further improving service quality, thereby offering customers state-of-the-art air and ground express solutions across the country. Some of these products are designed specifically for industries with time-definite requirements and there are others, which cater to vertical specific requirements, thus providing the much-required flexibility to the shipper and consignee. In addition to these proactive initiatives, Blue Dart has invested heavily in building an infrastructure that would provide unmatched value. The company plans to invest in air infrastructure, creating state-of-the-art facilities, transit hubs with hitech material handling equipment, etc. in the medium to long term. Blue Dart is continuously expanding its network and reach, continuously upgrading technology, building superior infrastructure and optimising resources to provide customers an edge in the market place.
YOGESH DHINGRA, COO & Finance Director, Blue Dart Express
Damco has been offering freight forwarding services (ocean and air), landside services (transportation, warehousing and customs clearance) and supply chain management services (import-export logistics, purchase order management, vendor management, document management, supply chain visibility solutions and supply chain development solutions) for the past 18 years in India. During these years, we have seen many changes in the Indian market and the consumer demands. Today, Indian companies supply to global MNCs and are sourcing from a variety of world markets. Their supply chains have become global, and hence, more demanding. In addition, this has led to an increased focus on the quality, reliability and safety of the supply chain operations. Infrastructural development and industrialisation in India has also meant that a lot more large dimensional cargo is being transported to and from India. Project cargo logistics has hence emerged as a key sector in the logistics landscape. Looking at all the promising prospects, for Damco, internationally, India is a critical market and we hope to grow 2-3 times in the Indian market in a few years. This will surely mean that we will target new market segments, new customers and new solutions to achieve our ambitious plans. We are confident that the opportunities in the growing Indian market will surely provide us enough scope to achieve our targets.
LARS SORENSEN, Regional Manager, Damco South Asia
We have always excelled in providing integrated supply chain solutions to our customers. With the promise of being ‘Custodians First, Carriers Later’, Safexpress offers a single-window solution for all kinds of supply chain & logistics requirements. For over a decade, we have been focussing intensely on providing specialised value-added services to our customers. These value-added services include packaging, labelling, store-ready delivery, quality checks and reverse logistics. We have chalked out a plan to invest Rs 1,000 crore in the next 3-4 years as a part of our growth strategy. Bulk of these investments will go towards augmenting our warehousing capabilities. Now, we are driving a warehousing revolution in the country, and we expect that this would be a major growth area for the industry in near future. We are in the process of developing 32 ultra-modern logistics parks at key industrial hubs across India. Out of these, 10 logistics parks have already been launched in the last one year at strategic locations across the country including Gurgaon, Nagpur, Ahmedabad, Kolkata, Bilaspur, Chennai, Salem, Puducherry, Pune and Rudrapur. We will be creating 4 million square feet of additional warehousing space across the country in the next couple of years, adding to our already existing warehousing space of 6 million square feet. these logistics parks will redefine the way supply chains function in our country today. Apart from that, we would be investing in a few other critical areas including manpower augmentation, IT Infrastructure development, setting up of new offices and expanding our fleet.
VINEET KANAUJIA, GM-Marketing, Safexpress
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WIRELESS TECHNOLOGY
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DIN G A E H Wireless technologies ranging from simple SMS, GPS to GPRS and RFID solutions provide track and trace capabilities to logistics service providers (LSPs), besides reducing their operational costs. Most of these solutions have revolutionised the logistics sector. If these wireless technologies are implemented properly across the various functions of the supply chain, it will help LSPs to improve productivity & efficiency, with enhanced visibility and transparency in the movement of goods, thereby spearheading the sector’s growth.
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SHIVANI MODY WITH the objective of improving supply chain performance, logistics service providers are implementing every possible measure for enhancing the quality of operations–right from logistics to the warehousing facilities. In this direction, they are increasingly adopting wireless technologies in various areas of operations, especially warehousing to improve handling and movement of goods and bring down the number of errors. The use of wireless technology eliminates logistics errors within any given warehouse operation. Today, the application of wireless in logistics sector has gone beyond basic freight tracking to include equipment control, traffic management, tollbooth operations and the detection of track defects along rail lines. On the contribution of wireless solutions to logistics sector, Amar More, VP–logistics practice, Kale Consultants, notes, “Mobility and wireless technologies
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have created quite a stir in the recent times. A person does not have to be located in one place to perform regular business activities. In essence, wireless is taking the logistics sector to new levels of efficiencies.” Adding to the potential applications of wireless, he avers, “Our studies show that there is a potential of reducing operational costs by at least 1015 per cent by using wireless solutions in the warehouses and container yards. Moreover, it is seen that in container yards handling up to 5,000 TEUs a month, smart applications accessible through handhelds or vehicle mounts have a payback period of less than two years.” The wireless technologies help in reducing cost as it avoids duplicate data entry, reduces data entry errors, enables faster access to shipments avoiding redundant processes due to unavailability of correct and real-time data. Sanjiv Kathuria, director (sales & marketing), TNT India, says, “The crux of
a robust supply chain is information flow and availability across the product cycle in the chain. With information flowing across the chain, it helps in planning and executing inventory across the supply chain in a controlled fashion. This helps in lowering cost at every point in the chain, and hence, reducing the final price of the product and redistributing extra revenue across all points. Wireless technologies can help address these issues in an organised manner and reduce the overall costs.” Elaborating on the need for wireless technology, Amit Maheshwari, CEO, Softlink Logistics Systems, says, “The logistics sector is dynamic and the use of wireless technology has made a huge impact on its services. Most of the technologies has been there earlier but now the adoption is increasing, and has reached even remote locations.” Some of the technologies that are currently adopted by logistics service providers are elaborated here:
MOBILE ALERTS In the logistics sector, it is extremely important to be updated on the status of the shipment. This knowledge actually optimises inventory management across the supply chain. Today, there are systems that provide proactive alerts on the cell phones in the form of SMS to track and manage shipment movements. For instance, if a shipment is not moving in a warehouse and is about to miss the service level agreement, then automatic alerts through mobile phones can be sent to the supervisors to ensure the adherence to the service levels. S Devaraj, GM (sea & air import/ air export), BWC Logistics, observes, “Wireless devices are being used extensively since last three to four years and are now enhancing the business capabilities. Mobiles, handhelds, laptops are used in various operations to enhance communication as well.” Srinath Manda, industry analyst (automotive, transportation & logistics practice) – South Asia, Middle East and North Africa, Frost & Sullivan, feels, “Most of the wireless technologies are in early stages. Majority of these solutions are used by the IT hardware, pharma, auto industry, but not on a massive scale.”
HANDHELD/PDA DEVICES The wireless devices, forming a major part of the wireless network, are commonly used in warehouses and container yards. These devices bring in efficiencies in operations. Earlier, a yard supervisor had to print the location chart of the yard from a terminal in the administrative building, and then go and locate the container. In recent times, with PDAs or handheld devices, the supervisor can locate the container; update the locations from the yard itself by accessing the yard management software through his handheld devices. Maheshwari says, “A manager or a worker on the move can connect to a system and update information online rather than doing it manually. Moreover, by using these devices, information retrieval becomes easier, saving time and reducing costs for companies.”
GPS Using a GPS system, companies can see the precise location of a vehicle on a graph as they receive real-time signals via the device. Maheshwari says, “GPS
systems can be useful in case of a rolling stock. The device can record and transmit the information on its own.” Employing GPS technology, customers can track the cargo in transit on trucks, trailers, rail wagons, etc. Along with constant visibility of the cargo, it can also help in optimising the cargo movement. To this, Devaraj says, “There is stiff competition in the logistics space and players have no choice but to provide the latest services. Track and trace is one of the major services. Each importer and exporter is interested in getting real-time information regarding shipment status on their mobile phones via SMS and email alerts.”
handling of large volumes of goods.” Maheshwari says, “RFID is a cheap technology but the disadvantage is that it needs a reader. These readers placed on the gates of the yard can read the information and send it back to the central server. Here it becomes necessary to have a proper IT system in place to interpret the data. This data can be connected with the inventory system, which will automatically update the information.”
CHALLENGES ABOUND While most of the wireless technologies are being employed in the logistics sector, the major challenge lies in the limited expertise, inadequate infrastructure
The wireless technology is now seeing increased adoption with the rising volumes. India needs to focus on R&D in wireless technology for logistics sector. Some of the global wireless technology solutions can be localised for the country. S DEVARAJ, GM (SEA & AIR IMPORT- EXPORT), BWC LOGISTICS Narasimhan Santhanam, vice chairman, Sattva Logistics Group, says, “Tracking the cargo is important for customers, as it helps them in the decision-making process. Any change or delay in the transportation of goods to the desired locations can be communicated and the management can make the necessary changes in the plans. GPS has been successfully implemented by truck fleet owners and the railways.”
RFID Currently many companies are using or conducting trials with RFID technology, especially in the warehousing space. The RFID tags bring in tremendous efficiency and reduction of errors by helping proactive tracking and avoiding entry of the data that is already coded onto the tags. Currently in India, majority of the players use the bar coding technique, which is manual, and the use of RFID, an automated technique, is restricted. D Vijaya Kumar, managing partner, Adarsh Shipping & Services, states, “RFID implementation will benefit logistics sector to a great extent. The process reduces manual intervention and thus reduces human errors. The data can be easily captured and recorded. Moreover, information retrieval is faster. RFID is an efficient technology when it comes to
(network availability) in remote areas and support for the solutions, high cost of implementation and lack of development of the supporting ecosystem. In addition, the lack of sophisticated technology and infrastructure has led to inefficiencies in current warehouses. Added to this, concepts or tools such as warehouse management systems, automation or vertical space utilisation are virtually nonexistent for majority of the LSPs. Santhanam says, “The RFID systems can easily be integrated with the hardware and software, but it has not undergone extensive trials. Both the active and passive tags have problems, as we work with different kinds of materials – steel, iron, environments having high temperatures, which affects the working of the RFID. The lack of manpower also dissuades companies from adopting the solutions.” The other issues that the industry faces is the lack of research and development and innovation acumen in the logistics sector. Devaraj feels, “The wireless technology is now seeing increased adoption with the rising volumes. India needs to focus on R&D in wireless technology for logistics sector. Some of the global wireless technology solutions can be localised for the country.”
JUNE 2010 • SMART LOGISTICS • 35
Wireless technology, continued
The Indian logistics sector is fragmented, which consists of many small players. Majority of the logistics service providers have not implemented wireless technology due to the high costs and lack of IT infrastructure. Maheshwari says, “It is only the major logistics players, who have implemented the wireless technology. These companies are seeing enhancements in information flow and have reported improvement in efficiencies.” He further informs, “A proper regulatory framework is needed in the country for the large scale adoption of the wireless technologies. This will support the adoption of wireless technology across the ecosystem.”
TECHNOLOGY OF THE FUTURE The technologies that will have extensive adoption in the logistics sector in future is 3G/4G, wi-fi and VoIP, among others. Some of these have already been deployed in international locations and are giving results in terms of improved efficiency of the operations and enhanced productivity. Paving way for 3G/4G With increasing volumes and new mobile applications, the sector is now looking to leverage the 3G and 4G technology for growth. Since these have better quality and enhanced capacity, the technology can help shape a different scenario for the logistics sector. As Santhanam says, “The 3G-based systems have shown good audio and video quality. This will bring in a revolution in the logistics sector if properly implemented. The technology application will become cheaper as the use increases with time. After the 3G, applications will be developed for 4G, which will give enhanced quality and the capability to handle more applications.” Through the use of 3G/4G networks in the logistics sector, employees can take real-time pictures and videos of the damaged goods and send them to the main office. This would bring in more reliability, assurance and even support the return process. Devices using CDMA and GSM In countries such as the US, companies are experimenting with mobile devices that use a SIM using the code division multiple access (CDMA) or global system for mobile communications (GSM) technology. These devices mounted on the vehicle provide information via the network of towers similar to the mobile phone connection. Maheshwari says,
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“These are specially designed devices, which give the positioning based on the tower connectivity. Using real-time information, one can predict the exact location with a difference of maybe 10 metre.” He adds, “Further if these solutions are used in the cloud technology, it can reduce costs for companies. For instance, the use of a cloud solution can cost Rs 12,000 to Rs 13,000 a month, which is one-fourth the regular cost.” As a replacement to the GPS technology, this process uses the mobile network, which is cheaper and easily available. With successful trials, this technology can see acceptance in the logistics sector in the country. Manda says, “We are seeing the increased use of CDMA/GSM technology in India. The drivers are given mobile phones that can be used to track the movement. This technology will see more penetration in the market, as it is feasible and an executable form of application for the Indian logistics service providers.” Scope of wi-fi & wireless sensors In India, wi-fi technology can be implemented as it provides high performance. One of the ways of using wi-fi technology is with the RFID, which can be used as an asset tracking solution. Any movement of goods, materials in the logistics area can be tracked and updated in the central system. The other benefit of using a wi-fi network is that it enables a person to access the asset tracking system, from any part of the world. Some researchers are even working with the idea of using wireless sensors for logistics applications. One such commonly investigated scenario is the intelligent transport good, for deciding the transport vehicle. Factors such as expected time of arrival at the destination, risks of not arriving in time, suitability of transport vehicle for the transport, costs and sensors available in the transport vehicle to monitor the transport conditions are considered before taking a decision. The other trials conducted by the logistics sector using wireless sensors network are for inventory tracking. These systems, if implemented, can help in devising new ways of interpersonal networking that will lead to ubiquitous wireless communications and considerably improve operations. Manda says, “The wi-fi and wireless sensor networks are subsets of the RFID network. These can play an important role in inventory and asset tracking in the
logistics yards. With the growing number of warehouses and government initiatives in this area, we see potential for RFID adoption. In international locations, one will find workers moving around in the yard, feeding information in the devices that moves through the wi-fi network.” Using voice-related solutions Nowadays, companies in developed countries are using the voice over Internet protocol (VoIP) solution for warehouse operations. This solution integrated with their supply chain software is used for voice-based warehousing such as a voice picking application. These applications can be used for all the mobility workers across the enterprise and not just restricted to the warehouse. The technology is easy to implement and does not require any training. Devaraj informs, “Voice-based technologies need to be customised for Indian logistics players. The language, accent, places where it is used–all need to be localised for use in the country. But voice-based solution has to go a long way to become popular and deployed on a large-scale.”
MOVING FORWARD The mobile revolution has made the most generic wireless device become virtually ubiquitous in the country. The 1G and 2G wireless technologies have already reached the masses and now the 3G devices are slowly making its way into the market. However, More informs, “In the logistics sector, the handheld devices, vehicle mounts are yet to achieve scale. However, the situation is slowly changing with the steadily growing trade and greater realisation that more manpower is not a scalable alternative and the usage of wireless devices for logistics operations makes more sense.” Currently faced with the challenge of improving efficiency and reducing operation costs, the logistics sector will definitely see the adoption of wireless technology as a way forward. Some of the technologies have proven their worth and can be implemented by the companies. Joining the bandwagon are the customers, who are demanding enhanced services. All these factors will ensure that the LSPs implement the latest wireless solutions, which can bring in reliability and connectivity for the customers. Further to this, since the Indian logistics sector is dynamic and mostly unorganised, wireless communication will be the way ahead to spearhead the sector’s growth.
PRICE TRENDS Road Freight Index Chart for May 2010 The RFI stood at 173 points for the month of May 2010, registering an increase of 2 points over May 2009.
IRFI TREND FOR MAY 2010
TRENDS MAY 2010
For Metros Ex–Delhi rates registered highest increase by 3.88 per cent and Ex-Kolkata rates registered highest decrease by 6.32 per cent.
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AUTOMOBILES The overall production data for April 2010 shows production growth of 37 per cent over same month last year. This is the first month of the year and the industry has maintained the momentum. Passenger vehicles segment in April 2010 grew at 34 per cent over same month last year.
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COMMERCIAL VEHICLES The overall commercial vehicles segment registered positive growth at 65 per cent in the month of April 2010 as compared to the same period last year. While medium & heavy commercial vehicles grew at 103 per cent, light commercial vehicles grew at 42 per cent.
TRENDS FOR JUNE 2010
FORECAST FOR JUNE 2010 The RFI in June 2009 over June 2008 registered a decrease by 1.42 per cent and 0.13 per cent increase over May 2008. The RFI stood at 170.88 for the month of June 2009 over 170.75 for the month of May 2008 registering an increase by 0.13 per cent. The RFI for the month of June 2010 can be expected to increase marginally.
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Indian Road Freight Index (IRFI), a service introduced by Transport Corporation of India (TCI), is an index of weighted average lorry freight rates across various routes, calculated based on the route density and the dynamic freight rates of routes across the country. Knowledge Partner: Transport Corporation of India (TCI); website: www.tcil.com; e-mail: irfi@tcil.com
JUNE 2010 • SMART LOGISTICS • 37
SECTOR ANALYSIS
FOOD LOGISTICS
PRESERVING
FRESHNESS FROM
FARM
TO
PLATE
With the availability of vast arable land, and favourable climate supporting the cultivation of a wide variety of fruits, vegetables and other crops, the Indian food industry is set to double its production by 2025. Moreover, India has the capability and the resources to become the food supplier of the world. However, at present, nearly 30 per cent of the produce is wasted. One of the key reasons responsible for this wastage is the inefficient supply chain management. Hence, the food for thought for the logistics sector lies in incorporating value-added ingredients in supply chain. GEETHA JAYARAMAN AND KTP RADHIKA JINOY INDIA is the second-largest producer of fruits and vegetables in the world. However, around 25-30 per cent of the fruits and vegetables grown in the country go waste due to the absence of adequate cold storage facilities and power infrastructure. When compared with the developed countries, the transportation of food items, especially fruits and vegetables through cold chain, accounts for a negligible share in India. “The lack of efficient transportation and logistics facilities results in massive income
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losses to the agricultural producers. This also negatively impacts the entire business value chain, thereby hitting the end-consumer, who has to pay more for less value products,” says Vineet Agarwal, executive director, Transport Corporation of India (TCI).
CURRENT SCENARIO Considering the significant contribution of agriculture to the Indian GDP, it is surprising that the agriculture infrastructure across the entire value chain (from pre-harvest
to marketing) remains underdeveloped. The infrastructure in India in terms of road, rail, and air links are not sufficient. Despite the fact that warehousing plays a critical role in supply chain operations, it receives an under nourished treatment in India. In addition, non-availability of core infrastructure facilities like hightech controlled production units, grading, packaging, cold chains, logistics, warehousing, integrated processing units along with inefficient supply chain; poor transportation; and erratic power supply
are the major concerns in the country across the food value chain. Besides these problems, lack of market awareness inevitably hampers the quality of produce in the supply chain. Adding to this, Munesh Tyaagi, head-quality & technical, FieldFresh Foods, points out, “Lack of knowledge about the present market trends acts as a major bottleneck for producers. To improve the quality of the product, the producer must work according to the market requirements.” In addition, the food producers should outsource distribution activities to companies having expertise in food distribution. Arpita Mukherjee, professor, Indian Council for Research on International Economic Relations, avers, “Lack of specialised distribution companies for perishable produce/processed food products is yet another problem that the sector urgently needs to address. Such specialised distribution companies will provide refrigerated transport and warehouse facilities, along with timely distribution of products.” The food supply chain is a highly complex set-up with several perishable goods and numerous small stakeholders. Each stakeholder–farmers, wholesalers, food manufacturers and retailers – works independently. Commenting on the set-up, Vishwas Udgirkar, executive director-government & infrastructure practice, PricewaterhouseCoopers, states, “Food grain procurement and distribution in India is still largely under government control. The Food Corporation of India remains the nodal agency for procurement and distribution.” In India, the infrastructure connecting each link in the food supply chain is not adequate to meet the emerging needs. “Lack of comprehensive cold chain network, both in terms of storage and transportation, is one of the key challenges faced by this industry along with poor postharvest methods of warehousing, storage and unsafe transportation from the point of production to the point of sale,” avers AK Agarwal, director, DRS Group. Multiple points of manual handling, inadequate packaging and lack of mobile cold storage facilities like refrigerated trucks and rail wagons are also causing challenges. “At present, the infrastructure required to meet the logistics demands of food industry is not sufficient. There is a high need for technological advancements and big investments in this area. In addition,
The rising demand for food logistics coupled with 100 per cent foreign direct investment being allowed in the cold chain sector with the infrastructure-status conferred upon it, the cold chain industry expects to see a huge capacity addition in the near future. VINEET AGARWAL, EXECUTIVE DIRECTOR, TRANSPORT CORPORATION OF INDIA (TCI) adequate storage facilities, proper roads, and efficient connectivity will enhance the overall efficiency of food supply chain management. The government needs to give a thrust to the process of developing better infrastructure in the country,” says Vineet Agarwal. Adding to this Udgirkar quotes, “The losses at warehouses also validate the need for improved logistics infrastructure. Further, inadequate storage facilities and refrigerated transport add to the problem of wastages of all perishable produce before reaching the endconsumers. While we are seeing some actions pertaining to the improvement of the overall food and agri-logistics, any concrete development is yet to be witnessed, and hence, there remains a huge investment opportunity in this area.”
LOGISTICS OPPORTUNITIES According to a recent survey, the Indian food market is all set to double by the year 2025. This growth would be led by a rapid economic development, innovative technologies, growing consumerism and improved lifestyle. But to achieve this growth, the Indian food market has to control the losses incurred. The significant loss in the food and agri-sector indicates the enormous opportunities for logistics players to play a significant role in curbing these losses. One of the upcoming investment opportunities is in the area of improvement of end-to-end supply chain infrastructure. The decentralisation of food grain procurement, development and modernisation of warehouses on publicprivate partnership (PPP) basis could create further opportunities for private players. In addition to the above, there is a need for proper network at every level of supply chain from production storage to consumption centres that is supported by efficient and dedicated transportation in reefer containers. “While there are issues of scalability, networking at every level remains an attractive opportunity for logistics players. One of the key factors for this would be time-bound rail connectivity
to some of the key districts and last-mile road connectivity to rural areas – the lack of which makes it almost impossible for farmers to send their produce to distant markets, and they end up being the victim of intermediaries,” says Udgirkar. Apart from farm produce, the development of the food processing industry in India is resulting in introduction of a wide range of branded, packaged, processed and short-shelf life products that need to be distributed across various locations under specified ambient conditions in a time-sensitive manner. Also, the Indian economy has also emerged as a major player in import and export of many food and agriculturerelated products. This has created a huge demand for food logistics. AK Agarwal says, “Today, India has a capacity of storing only 10 per cent of its produce in the cold storage facilities. This prevailing gap provides a great opportunity for logistics and supply chain management companies. If more investments are made in improving the infrastructure, not just the industry but India as a whole can improve its position as leading exporter of these products.” Adding to this, Vineet Agarwal says, “Today, not just malls but even next door grocery stores are stocked with imported fruits. These factors are contributing to the huge demand for food logistics in the country. On account of the rising demand for food logistics coupled with 100 per cent foreign direct investment being allowed in the cold chain sector with the infrastructure-status conferred upon it, the cold chain industry expects to see a huge capacity addition in the near future.”
EFFICIENT LOGISTICS IS THE NEED An efficient supply chain is an integral need for logistics players to realise the emerging opportunities in agri-food industry. The current inefficiencies in the supply chain lead to wastage of fruits and vegetables worth Rs 1 lakh crore annually. “As the food supply chain is temperature-sensitive and manual handling reduces the product
JUNE 2010 • SMART LOGISTICS • 39
Food logistics, continued
Methods to modernise India’s food supply chain to root out food shortage: • • • • • • • • •
Effective implementation of Model Act on Agricultural Marketing Linking retailers with suppliers Experimenting with various retail formats Efficient and effective utilisation of existing resources Modernisation of mandis Addressing issues in contract farming Harmonisation of taxes Public-private partnerships in infrastructure development Understanding the existing needs of the consumers and identifying potential customers, and • Focus on product innovation and skill development. quality and life, logistics providers with air-conditioned trucks, automatic handling equipment and trained manpower providing end-to-end support will help reduce the damage,” notes A K Agarwal. Considering the ongoing debate on food crisis and pressure on prices, the existing logistics scenario is neither desirable nor sustainable. Further, it needs to be realised that efficient logistics not only leads to reduced losses and transportation time but also increases the potential income of farmers. “This improved income level may result in the use of high quality seeds and fertilisers for harvesting, thus improving the overall quality of produce,” says Udgirkar.
TECHNOLOGY, THE BUZZ WORD Technology and better supply chain management play a very important role in the food and agriculture industry. Data integration, financial flow management, supply-demand matching, collaborative forecasting, information sharing, goods movement synchronisation through efficient transport scheduling will help in reducing the damages caused in transit and generate better revenues for each partner in the value chain. “For the food and agri-logistics services, there should be a number of specialised diversified technology-driven solutions. Technologies such as bar-coding and more recently introduced radio frequency identification (RFID) tags, automated warehousing, packaging, labelling, branding, etc. have great potential to help the food processing industry in India to improve its market and business prospects,” says Vineet Agarwal.
60 per cent of employment generation. The Indian Government should take initiatives to improve the situation of this industry. “The government should formulate proper policy framework for giving a boost to the industry and take measures such as reduction of sales tax and excise on processed value-added foods, remove octroi, entry tax, etc.,” points out Mukherjee. Industry should be given exemption/subsidies to encourage
Considering that there are several stakeholders in the business, it is essential that the network and services are developed in a manner that address the needs of not only the consumers, but also incentivise the farmers to use the infrastructure and services. VISHWAS UDGIRKAR, EXECUTIVE DIRECTOR-GOVERNMENT & INFRASTRUCTURE PRACTICE, PRICEWATERHOUSECOOPERS
investment in cold chain infrastructure, specifically for large-scale projects including availability of land. Vineet Agarwal says, “Since time-definite delivery is critical, interstate checkposts should have a clearance passage for refrigerated transportation.” The focus area should be to build a network from production to consumption centres, technological advancements and efficient transportation. “Considering that there are several stakeholders in the business, it is essential that the network and services are developed in a manner that address the needs of not only the consumers, but also incentivise the farmers to use the infrastructure and services,” adds Udgirkar.
GOVERNMENT INITIATIVES India is an agro-based country and agriculture & allied industry accounts for
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changed drastically. Like in the developed world, there has been constant growth in the demand for frozen meat and fresh vegetables in India–not only in metros but also in tier-II and tier-III cities. The future of the Indian food supply chain and logistics business is quite promising. By building efficient, effective and affordable supply chain using state-of-theart techniques, one can ensure quality products, thereby enhancing customer satisfaction. AK Agarwal observes, “Having an efficient supply chain will not only enable companies to increase their marketshare and build a brand image, but also serve in the nation-building process. The government too is taking adequate steps in this direction to strengthen the supply chain system and is aiding farming sector by creating agri export zones (AEZs).” Considering the advantages of PPP in many other industries, it would be beneficial to introduce private participation in building food and agriinfrastructure. “The government has announced creation of facilities for storing temperature-controlled perishable cargo
FUTURE OUTLOOK The consumption patterns of Indians have
and transportation of the same through public-private partnership,” adds Udgirkar. Further, investment-linked tax incentives for setting up & operating cold chains and warehousing facilities for agricultural produce have been announced. Mukherjee says, “Private players have shown interest in developing cold chain and logistics infrastructure. Significant improvement in food and agri-logistics seem imminent, with PPP initiatives along with government initiatives.” Hence, in the medium to long run, India could expect more robust policy framework, larger private participation and better logistics infrastructure for agriculture sector. However, for this to happen, the government and industry need to realise that time has come for larger level reforms in this key sector.
SECTOR ANALYSIS
RFID IN FOOD SUPPLY CHAIN
ENABLING REAL-TIME
TRACEABILITY
Keeping food safe as it moves through the supply chain poses a significant challenge. Perishable food items face more risk of damage and mishandling that can lead to contamination or spoilage. Moreover, the globalisation of supply chain makes it mandatory to ensure food safety. In this scenario, deployment of RFID enables the collection of all the data required to ensure food safety and keep track of the activities as it moves through national or international food supply chain.
THE growth in the globalisation of the food supply chain has a major impact on the ability to protect consumer health. Food imports to the US have almost doubled in the past decade, from $36 billion in 1997 to more than $70 billion in 2007. In response to consumer demand for yearround access to out-of-season and exotic produce, 60 per cent of all fresh fruits and vegetables are now imported from over 150 countries all over the world,
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including kiwi from New Zealand, apples from Canada, strawberries from Mexico and grapes from Chili. Additionally, the type of food imported is changing. In the past, imported products were primarily food ingredients that were then processed into various types of food inside the US borders. Since the actual processing took place in the US, FDA regulations provided maximum protection for consumer health. But today, many
food items that are imported are ‘readyto-eat’, from fruits and vegetables to seafood, further increasing the opportunity for food-borne illness to enter the food supply chain. For example, in 1980 less than half of the total seafood consumed was imported— today that number has increased to over 75 per cent. And since the regulatory systems of the many countries of origin of these items differ significantly, the safety regulations that
determine how imported foods are to be handled vary widely. Given below are some of the challenges in the food chain.
SHARP INCREASE IN CONTAMINATION INCIDENTS While enterprises struggle to improve safety as food moves through the supply chain, the incidence of food contamination is on the rise. Recently, major contamination outbreaks were witnessed in items like peanut butter, spinach, tomatoes and lettuce. The US Center for Disease Control estimates that approximately 76 million illnesses per year are food-borne, and reports of E. coli infections have increased 50 per cent since 2004, while Vibrio infections (caused by ingesting raw shellfish) have increased by 78 per cent in the last ten years. A single contamination incident can cause financial devastation throughout the food supply chain, affecting growers, distributors and store owners, besides shaking consumer confidence in the safety of food. For some companies in the supply chain, the losses are too great to survive.
CHANGES IN CONSUMPTION TRENDS Today’s busy consumers often rank convenience over price — a trend that can translate into increased opportunities for food contamination. For example, many consumers today would prefer to purchase a bag of prepared ready-to-eat lettuce instead of a head of lettuce that must be prepared. As a result, bacteria in a tainted head of lettuce that may have
ACT
In response to growing food safety issues, new government regulations have been developed to help protect food as it travels through the supply chain. While these regulations do improve consumer safety, they also translate into a substantial increase in record-keeping requirements for companies throughout the food supply chain. only affected one family in the past might now end up in multiple of bags of lettuce, potentially causing food-borne illness in hundreds of people.
INCREASED GOVERNMENT REGULATIONS In response to growing food safety issues, new government regulations have been developed to help protect food as it travels through the supply chain. While these regulations do improve consumer safety, they also translate into a substantial increase in record-keeping requirements for companies throughout the food supply chain. For example, federal regulations in the US such as The Federal Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (enacted after September 11, 2001) and the US FDA Good Manufacturing Practice Regulations as well as the EU food laws defined by the European Commission (EC) now require the collection and maintenance of detailed specific information as food moves through the supply chain. In order to remain profitable, enterprises in the food industry need to collect, filter and react to this massive
ADVANTAGE RFID • With RFID, food is tracked from the moment it is picked in the field. RFID tags are applied to collection bins, and when a bin is full, an RFIDenabled mobile computer is utilised to read the tag. • The unique identifier associated with the bin is captured, the date and time are automatically recorded, and any other additional information needed to enable full traceability back to the origin of the product is entered, such as the picker’s name and the picking location. • The automation of the data collection process protects the integrity of the data set, and encourages the capture of a richer set of information due to the simplicity of data input. • When combined with a locationing technology such as GPS, RFID can automatically record the exact location in the field where the produce was picked, allowing growers to pinpoint the source of contaminated produce quickly and more cost-effectively — protecting the health of consumers as well as the business.
amount of information accurately and cost-effectively — a task at which radio frequency identification (RFID) excels.
RFID — A CRITICAL NEW LINK IN THE FOOD SUPPLY CHAIN RFID can help improve the efficiency and safety of the food supply chain by enabling the collection of vast amount of data required to ensure the food safety as it moves through either the national or international food supply chain. Passive RFID tags provide cost-effective tracking and traceabiity as food moves through the supply chain, while temperaturesensing and data logging RFID tags capture information about the conditions the food is subjected to on the journey from field to fork. The heavy automation afforded by RFID can also error-proof the information collection process, providing the granular and accurate information needed to make the right decisions at the right time to ensure safe handling of food — and to help spot potential spoilage or tampering incidents before food reaches the grocery store shelves. In the event, where a recall is necessary, the serialised data associated with the product and its movement through the supply chain enables more narrow recalls. Potentially tainted batches can be rapidly located and removed from shelves, minimising health risks. In addition, the ability to execute narrow recalls eliminates the need to pull unaffected food from the shelves, reducing the massive costs associated with broader recalls. Let us now examine how RFID can ultimately improve the quality and safety of food throughout the many processes involved in bringing perishable items to the retail grocery store shelves.
RFID AND PRODUCE: FROM HARVEST TO MARKET Without RFID, tracking produce starts with paper and pen in the fields, where workers complete forms in order to
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RFID in food logistics, continued
collect minimally required data. This information is eventually entered into a computer. Issues with this process include the increased opportunity for error: • The data is touched twice (captured manually on paper and then keyed into the computer), further compounded by the need to transcribe handwriting. • The lag times between when a product is picked, when data is collected and transcribed, and when it is visible hampers the ability to make better business decisions that can protect food safety and extend produce shelf life. As produce continues its trip through the supply chain from the processing plant to the distributor to the market, the lack of real-time visibility continues to hamper decision-making that could improve food safety — and profitability. RFID completely eliminates paperwork. In the field, instead of completing a paperbased form, workers simply apply an RFID tag to the collection bin. After the bin is full, an RFID-enabled mobile computer is utilised to read the tag, automating and accurately capturing the unique identifier associated with the bin. The date and time are automatically recorded and additional information to enable full traceability back to the origin of the product is entered, such as the picker’s name and the picking location. Drop down menus and an intuitive interface can simplify and automate the data collection process, protect the integrity of the data set, and encourage the capture of a richer set of information due to the simplicity of data input. A locationing technology such as GPS can also be combined with RFID to automatically record the exact location in the field where the produce was picked, further automating the data collection process. In the event that a tainted product is discovered, growers can pinpoint the area where the contaminated produce was harvested. Armed with this information, growers can immediately begin to analyse the soil, water and more in the specific area where the offending produce was grown. As a result, the problem can be isolated and contained faster and more cost-effectively — helping to minimise the potential number of consumers that could be affected. After the produce is picked
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and the bin logged into the system, the produce is trucked to the processing plant for immediate cooling. As the bins are unloaded, RFID reader portals on the dock automatically capture the information on the RFID tags, further reducing manual labour and associated logging errors. RFID also enables the analysis of a richer set of metrics, enabling better decisionmaking upon arrival at the first stop in the produce supply chain — the processing plant receiving dock. Instead of processing bins as they are received (first in, first out), bins can be processed based on pick time (earliest pick time, first processed). Since every hour of delay in cooling significantly decreases shelf life, this capability helps reduce the risk of spoilage as the produce makes its way through the distribution channel to the grocer shelves. And in the event that the length of time the produce took to travel from field to the processing plant exceeds acceptable limits (for example, if the truck carrying the goods breaks down), the system can automatically record the exception and reject the bin, preventing unsuitable produce from continuing down the supply chain. After initial processing has been completed, the pallets of produce are then placed in cold storage to await shipment. When selected for shipment, an RFID reader at the shipping dock automatically captures the information on the RFID tags on every box, confirming that the correct product has been selected and logs each case ID to create an Advanced Shipping Notice (ASN), to alert the next processing point that the product is on its way. The pallets are then loaded onto trucks, continuing their
P
ASSIVE RFID TAGS PROVIDE COST-EFFECTIVE TRACKING AND TRACEABIITY AS FOOD MOVES THROUGH THE SUPPLY CHAIN, WHILE TEMPERATURE-SENSING AND DATA LOGGING RFID TAGS CAPTURE INFORMATION ABOUT THE CONDITIONS THE FOOD IS SUBJECTED TO ON THE JOURNEY FROM FIELD TO FORK.
journey to distributors. On the path to the grocer’s shelf, RFID readers at docks and other transition points capture the final product movements and append additional transit data to the records of each case. As a result, when boxes reach the grocer, a quick scan of the RFID tag on any box or pallet can instantly reveal the complete history for that particular batch of produce — all the way back to the exact location in the field where the product was grown, and which worker picked the product. EPC Gen 2, Class 3 RFID temperature sensor tags will soon add a major new functionality that will significantly improve the safety of the food supply chain. These sensor tags will monitor and record the temperature, and other environmental conditions, of the individual pallets while they are in the truck en route to a distributor or grocer. Any pallet that strays out of a defined temperature range can generate an alarm to alert the truck driver, who can then take immediate action to ensure that all pallets in the load remain in compliance with acceptable temperature ranges. In addition, the temperature information can be recorded — and either sent wirelessly to the appropriate business system or accessed when the truck arrives at its next destination. The result is instant visibility into the conditions of the load during transit, immediately upon arrival at the dock — something that is not possible today. This visibility allows recipients to determine if the load was properly handled and should be accepted or refused. In other cases, temperatures may have been acceptable during transit, but still outside ideal temperature ranges — a situation that can significantly reduce shelf life. Instant visibility into this condition upon shipment arrival provides distributors and grocers alike with the information needed to make the best decision: refuse the shipment or re-negotiate the acceptance terms. Since grocers are aware of the reduced shelf life, they can act accordingly and place the item on sale to prevent shrinkage due to spoilage. And finally, access to this granular temperature data during ‘end-to-end’ transit can provide the basis for important analytical information that can pinpoint the location of any consistent ‘trouble’ spots in the supply chain. Enterprises
can then proactively take the necessary steps to help prevent spoilage, foodborne illness and shrinkage.
RFID AND SEAFOOD: FROM NET TO MARKET RFID tags can enable easy tracing of any contaminated seafood anywhere in the food supply chain. For example, when a load of raw shrimp arrives at the dock, RFID tags can be applied to the holding bins. That identifier can then remain with the shrimp, whether they are bound for market ‘as it is’ or whether they become an ingredient in processed foods, such as frozen fried shrimp or shrimp stuffed fish fillets. In the event a compromised batch of shrimp is discovered, the shrimp and any products containing the shrimp can be located and removed from the supply chain rapidly — regardless of whether the products are located in a manufacturing plant, in a distribution warehouse or in the freezer section at the grocery store. In addition, temperature-sensing tags will play the same role as in produce, ensuring that this highly perishable product remained within safe temperature ranges throughout transit to distributors and grocers — again protecting consumer health and reducing spoilage.
RFID ADVANTAGE: IMPROVING FOOD SAFETY AND SUPPLY CHAIN EFFICIENCY In the food supply chain, consumer safety and enterprise profitability are both dependent on how rapidly product can move from the field, pasture and sea to the grocer’s shelves — as well as visibility into how the product was handled along the way. RFID improves both.
FOOD SAFETY IMPROVEMENTS Superior visibility into the movement of products through the supply chain provides the real-time granular data required to make better business decisions that increase food safety at every junction in the supply chain: • Visibility into harvest times and product temperature condition enables ‘first to expire, first out (FEFO) inventory management’, helping more rapid movement of produce from field to fork as well as reducing the chances of spoilage, food-borne illness and loss of product. • Distributors and grocers now have visibility into the length of time a
product has been travelling through the supply chain, condition during transit and remaining shelf life. More volatile perishables can be processed first, accuracy of ‘best by’ date stamps is increased; and distributors and grocers can recognise and refuse any product where quality may have been compromised — again improving food safety and quality. • Visibility into the whereabouts of contaminated product enables manufacturers, distributors and local grocers to issue more narrow recalls — recalls that are focussed on the specific lots that are potentially tainted rather than a broad recall of a specific class of item. As a result, tainted food can be quickly identified and removed regardless of where it may be in the supply chain, reducing the opportunity for inadvertent consumption and the resulting food-related illnesses — and improving the success rate of recalls. • More reliable data — The ability to automatically collect data by reading an RFID tag helps to error proof data collection. Moreover, the improved accuracy of the data in the system helps increase product safety.
SUPPLY CHAIN EFFICIENCY IMPROVEMENTS The same information that helps protect food as it moves through the supply chain also increases the efficiency of the supply chain, protecting profitability through: Loss prevention — The ability to move perishables through the supply chain as quickly as possible helps maximise product shelf life – and prevent shrinkage due to spoilage. Productivity improvements — The automated data capture eliminates the need for workers to capture information on paper forms, which in turn increases throughput — existing staff can now process more product per day. Substantial reduction in the cost of recalls — Real-time visibility into the exact whereabouts of any contaminated product enables a targeted recall effort that can be executed at a fraction of the time and cost associated with a traditional widespread recall. Cost-effective regulatory compliance — Complying with new government regulations can be a costly endeavour. Through automated collection of regulatory data and more, RFID enables
businesses to easily comply with new regulations without a substantial impact on margins. Brand protection — RFID can help enterprises in the food supply chain to prevent brand damage by providing the information needed to instantly spot and contain incidents before they can impact sales and brand value. The impact of outbreaks and the effect on the food industry as a whole cannot be underestimated. RFID can help enterprises prevent and mitigate incidents, reducing the potential negative impact on brand equity and sales. Reduction in liability — The ability to rapidly identify and remove potentially tainted food items from the supply chain minimises the dangers of food-borne illnesses — and the associated liabilities.
PROTECTING CONSUMER HEALTH Protecting today’s food supply chain has become ever more critical — but more difficult due to an increasingly complex and global supply chain. Countries all around the world must determine how to monitor the food supply chain to protect it from accidental contamination and purposeful bioterrorism, as well as validate that the product was handled safely from initial processing to receipt, regardless of the country of origination. Achieving this level of visibility will require the collection of a massive amount of data — including the collection of customised data for specific food verticals such as produce, seafood and cattle. RFID’s powerful and flexible automated data collection capabilities make the compilation of this data set financially feasible. Powerful data filtering capabilities can ensure the instant delivery of information to the right business systems, enabling real-time alarms for timely reaction to potential safety threats. With real-time visibility into concrete proof of product authenticity and handling procedures, enterprises are armed with the information needed to improve the safety of the food on our shelves — and to protect the health of our citizens. That same information can also be leveraged to improve overall operational efficiencies to protect brand equity, margins and profitability. Courtesy: White paper on ‘Improving the safety of the food supply chain: The value of RFID and traceability on a growing problem’, Motorola
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TECH TRACK IT TRENDS IN LOGISTICS
Fleet Management System Market To Rebound By 2012 MARKET growth in fleet management systems (FMS) will remain flat in the short term in the wake of the global economic recession, but will stage a return to healthy growth starting about 2012 as the market dynamics and trends shift to scalable end-to-end solutions, driver management applications, and regional strategic ecosystems. FMS revenues are expected to reach $9.5 billion in 2015, according to forecasts by ABI Research. From cost-reduction to workforce productivity Dominique Bonte, practice director, Telematics, says, “As a recession begins, costs (in this case particularly fuel costs) become increasingly important, and failure to reduce them can be fatal for some smaller businesses. Survivors squeeze every penny out of a fleet management service, focussing on small things such as driver behaviour, route navigation efficiency, routing, vehicle diagnostics, and preventive maintenance. Most of these
are machine-to-machine applications that have very little to do with human beings. “As recovery kicks in, emphasis shifts from cost reduction to workforce productivity. Now, the industry is moving towards empowering humans to drive profits rather than machines to reduce costs.” This effort is supported by increased awareness and adoption of technological solutions, and falling hardware component and wireless connectivity costs. Ripe for consolidation Among the barriers to FMS market growth are the absence of standardisation, market fragmentation, and the lack of differentiation between operators. “Most fleet management operations are doing pretty much the same thing,” notes Bonte. “Given that, the industry is ripe for consolidation. What the market needs in the long-term is a standard platform portfolio of features from which firms can pick and choose those that best suit their size and operations,” adds Bonte.
SaaS Model Saves the TMS Market DESPITE a severe worldwide recession that caused most enterprise software markets to shrink by double digits, the impact on the transportation management system (TMS) market was much less substantial, according to Steve Banker, service director – supply chain management, ARC Advisory Group. ARC defines TMS broadly as software solutions that facilitate the procurement of transportation services; the shortterm planning and optimisation of transportation activities, assets and resources; and the execution of transportation plans on a regional or global basis. They address all modes of transportation, including ocean, air, rail, truckload, less-than-truckload (LTL), parcel and private fleet. Thus ARC’s definition includes planning and
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execution, fleet management, global trade management, parcel management and carrier solutions. “Between 2007 and 2009, TMS sold on a traditional software model declined at a double-digit rate,” Banker notes. “If it had not been for solutions sold in a software-as-a-service (SaaS) model, which continued to have good growth, the market would be in far worse shape.” The SaaS sales model consists of solutions sold in a leasing model. These revenues can be associated with one instance of software being used by multiple customers, traditional hosting where each customer has their own instance of software that is hosted by the vendor, or it may involve the customer leasing software they host on their own servers.
Savi & Odin To Deliver RFID Software Platform SAVI and ODIN have recently partnered to offer the industry’s first and most comprehensive software platform leveraging both passive and active RFID technologies. The fully integrated solution will broaden and enrich customers’ ability to track and manage in real-time their items, supply chain assets and transport conveyances such as containers and vehicles. The companies have joined forces to develop the latest generation of RFID software that will exploit the full range of RFID and related Automatic Identification and Data Capture (AIDC) technologies. The solution is built to benefit customers in the aerospace and defence, manufacturing, healthcare and ITeS industries. Drawing on the deep experience of Lockheed Martin’s Savi in active, batterypowered RFID and ODIN’s expertise in passive RFID, the solution will enhance supply chain performance, efficiency and security within the four walls of facilities as well as throughout extended supply chains. “With ODIN’s depth of experience with passive RFID and Savi’s two decades of experience with active RFID, together we can bring the best of both worlds to improve the visibility of all kinds of supply chain assets and asset management performance, ” said David Stephens, CEO, Savi Technology. “With Savi and ODIN seamlessly integrating our respective solutions, we can bring a single off-the-shelf solution with near perfect accuracy,” said Patrick J Sweeney II, founder, ODIN. The Savi-ODIN offering will combine Savi’s active RFID SmartChain software suite and ODIN’s EasyEdge for passive RFID devices to automate the collection of passive and active RFID data onto a single platform.
Damco Rolls Out Forwarding Software DAMCO rolled out a new Kewill forwarding system to manage air and ocean shipments, including multimodal, between Asia and Europe. The system will provide the required localised documentation at each port. Damco, the combined brand for AP MollerMaerk’s logistics activities, said the Kewill software will provide its ocean and air freight forwarding customers with higher service levels, increased inventory management and shipment visibility, and greater operations efficiency.
Damco said it chose the system produced by the UK-based Kewill after extensive tests to see how users would accept it. The system will now be rolled out over the next two years to approximately 3,000 users across the Damco forwarding network covering more than 100 countries and over 250 branch offices worldwide. The roll-out represents a multimillion dollar investment by Damco in Kewill software and professional services over the next two years. The Kewill platform will automate and standardise parts of the ocean and air forwarding operation. Damco said the use of just one platform across the entire organisation will enhance visibility and facilitate easier global connectivity towards customers, suppliers and government entities. “This and the ability to file-share across the global business is expected to improve data-quality, reduce costly manual rework, and improve the customer experience,” Damco said.
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IT IN LOGISTICS
TMS
EXPLORING
SCALABLE SOLUTIONS The rising complexities in logistics operations are compelling many organisations to outsource their logistics requirements. However, studies reveal that going forward, the logistics outsourcing expenditure in areas like transportation, forwarding and customs clearance is likely to grow. Taking cue from this, transportation cost management is now seen as one of the key areas where organisations should explore opportunities to drive down significant costs. While opting for transportation management systems, it should be ensured that the solutions are scalable and support all users in the global collaborative supply chain without sacrificing system performance or security. IN today’s global market, where companies operate in different countries around the world, sourcing is increasingly being done from low-cost countries, for instance, China. The final products are then distributed globally. As a result, the supply chain footprint of most of the companies in India and worldwide are becoming more complex. In such a scenario, the role of logistics, especially logistics outsourcing, has become vital for a company’s supply chain practices. Increasingly, organisations today are opting to outsource their logistics operations to logistics service providers in order to manage the various complexities involved.
LOGISTICS OUTSOURCING An ineffective logistics process can hit a company’s bottomline. As per industry studies, logistics cost varies between 4 to 8 per cent of sales across industries. And
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when it comes to outsourcing, a recent third party logistics (3PL) study conducted by Georgia Institute of Technology shows that in Asia-Pacific, logistics outsourcing expenditure in areas such as international transportation, forwarding and customs clearance would grow from 57 per cent to 64 per cent within the next three to five years. As more organisations become dependent on 3PLs to manage and control their logistics activities, many players in the field do not have the capability to provide their customers with management, control, and visibility in the logistics processes. Due to this, 3PL providers are not able to provide an agile and integrated process, thereby losing customers and incurring high costs resulting from errors in shipment. The study also concludes that there is a significant IT gap that has been in the system for several years. Moreover,
today, transportation cost management has become a boardroom concern. Organisations are increasingly looking at developing effective transportation processes to manage the total cost of getting goods from the factories into the hands of the consumers. Companies are looking to manage the risks effectively and ensure timely delivery of goods to the end-customer.
TRANSPORTATION COST MANAGEMENT According to a study, just above onequarter of the entire $90-billion Indian logistics market is slated to grow at a compounded annual growth rate (CAGR) of over 16 per cent from 2007-10. The study further states, “The logistics cost of the Indian economy is over 13 per cent of GDP, compared to less than 10 per cent of GDP in almost the entire Western Europe
and North America.” Logistics is an important part of the supply chain. However, the part of logistics that is increasingly becoming an area of concern is transportation. Transportation mismanagement can ultimately cost a lot and provide a dent to effective supply chain management. This is why transportation cost management is now seen as one of the key supply chain areas where organisations should explore opportunities to drive down significant costs. As outsourced logistics grow and importance of 3PLs increases, transportation management systems (TMS) can help a lot in cutting cost, managing performance, and monitoring & controlling all aspects of logistics. And here IT has an important role to play.
O
ROLE OF IT IT can definitely help in managing and creating an effective transportation process, which can cut down the huge costs, associated with the unplanned logistics industry. In order to develop an effective transportation process, companies need certain key capabilities that include: Visibility: Visibility allows an organisation to have a complete picture of the current status of an order throughout the entire supply chain. It enables users to proactively respond to unforeseen exceptions, issues or opportunities based on rules that they have defined. It allows for process improvement and cost efficiency.
to rectify errors in the financial documents. Collaboration: Key players in the ecosystem need to be able to share real-time information. This will lead to a more responsive and agile distribution network, resulting in lower distribution cost and better customer service. Connectivity: Given that there are many different players in the ecosystem, it is vital to have the ability to connect these different key players. An open system lowers the costs of entry or exit, reduces the system complexities and transaction time. Execution: A complete control of the entire transportation process is vital as it helps to minimise the amount of manual process, tie execution to strategy, and ensure that shipments arrive at the right place at the right time and at the right cost. Optimisation: The primary objective of optimisation is to develop a least-cost transportation plan that balances the requirements of customer service against the cost of distribution. An optimised transportation plan not only reduces the total cost of transportation by about 1015 per cent per annum due to better asset utilisation and less distance travelled, but also helps to reduce the amount of fuel use and the level of emissions.
RGANISATIONS ARE INCREASINGLY LOOKING AT DEVELOPING EFFECTIVE TRANSPORTATION PROCESSES TO MANAGE THE TOTAL COST OF GETTING GOODS FROM THE FACTORIES INTO THE HANDS OF THE CONSUMERS. COMPANIES ARE LOOKING TO MANAGE THE RISKS EFFECTIVELY AND ENSURE TIMELY DELIVERY OF GOODS TO THE END-CUSTOMER.
Speed: It is important to create an adaptive transportation process that responds to the ever-changing needs of the customers. However, an adaptive and responsive transportation process needs to have access to real-time information. Freight Settlement: Freight settlement is usually one of the first processes that is outsourced due to its complexity and nature of transactions involved. However, over a period, many realise that the costs associated with outsourcing are far too expensive than insourcing. The factors leading to this change is due to: • Increased service problems viz, slow turnaround times for imaging and data entry as well as missing documentation, leading to overall delay • Inability to collaborate with carriers and customers effectively, which results in customers seeking services elsewhere • In some cases, it is the time taken
Transportation Management System (TMS) TMS has been designed to meet the demands of the logistics industry and manage as well as cut down the transportation costs largely. It provides transportation planning and execution capabilities to shippers and 3PL providers. TMS solutions integrate and streamline transportation planning, freight payment, execution, and business process automation on a single application across all modes of transportation, from full truckload to complex ocean, air and rail shipments. Using such solutions can improve customer service, lower transportation costs, enable better asset utilisation, and provide flexible & global fulfilment options. TMS segment has a huge growth potential. As per Gartner, TMS experienced significant growth (22 per cent) during 2007, and that growth continued in 2008, largely because of the increased recognition among shippers on the need for better management of their transportation assets. Currently, the market penetration of TMS solution is quite low in comparison to its potential. However, companies are slowly adopting TMS as a means to fight the operating as well as the exploding fuel costs and many other areas of concerns.
RECTIFYING TRANSPORTATION PROBLEMS Keeping the aforementioned factors in mind, there are many transportation management systems available in the market providing some or all of these capabilities. TMS solutions can help create an effective transportation process that would in turn cut cost and enable better management. However, while evaluating the right solutions, it is imperative for organisations to keep in mind that the solution should be scalable and be able to support all users in the global collaborative supply chain without sacrificing system performance or security. Therefore, the implementation of an effective transportation system will help organisations to swiftly identify and rectify transportation problems and also manage their customers’ needs and demands globally. Surya Bhardwaj, VP–Applications, Oracle India
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SUPPLY CHAIN BEST PRACTICES
ADDRESSING FIVE BIGGEST CHALLENGES
CREATING SUPPLY CHAINS OF THE FUTURE Like economies and financial markets, as supply chains grow more global and interconnected, they get more exposed to shocks and disruptions. Moreover, the supply chain speed exacerbates the problem. Even minor miscalculations can have major consequences as the impact spreads like viruses throughout the complex supply chain networks. Hence, it is vital to build smarter supply chains and address the issues that pose a challenge to this objective.
BUSINESSES and supply chains have become substantially more global over the last decade. Between 1995 and 2007, the number of transnational companies more than doubled from 38,000 to 79,000, and international subsidiaries nearly tripled from 2,65,000 to 7,90,000, according to a report by the United Nations. In addition to spreading geographically, supply chains now involve more companies. In a study, nearly 80 per cent of executives opined that they expected the number of collaborative relationships with third parties to increase. And an ever-broader range of activities is being outsourced: in the past three years, R&D outsourcing is forecast to have increased by 65 per cent, and engineering services and product design projects by more than 80
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per cent, according to the Offshoring Research Network.
T
OP SUPPLY CHAINS ARE TAKING RISK MANAGEMENT A STEP FURTHER BY INCORPORATING ‘IT’ INTO THEIR PLANS AND USING IT TO MONITOR AND ACT ON DISRUPTIVE EVENTS.
Supply chains must also contend with rapidly expanding and contracting product portfolios. In the consumer products industry, for example, product introductions increased by 17 per cent in 2006 – more than double the 2005 rate. Portfolio rationalisation is eliminating stock keeping units (SKUs) at a faster scale. Together, these shifts are creating constant turmoil. In such a scenario, it is imperative to know how the supply chain executives are coping. As part of a Global Chief Supply Chain Officer Study, IBM interacted with 400 senior executives from North America, Western Europe, and the AsiaPacific region, who are responsible for their organisations’ supply chain strategies and operations. IBM’s discussions revealed five key findings related to the following: Cost containment: Rapid change is affecting this traditional area of supply chain strength and outstripping the executives’ ability to adapt. When it comes to managing costs, companies with top supply chains take a longer-term view, according to AMR Research. These companies are moving more quickly toward agile supply chains that allow rapid response to changing market conditions and variable cost structures that ramp up and down with revenues. Flexibility is
UICK TAKE Supply chain concerns • As compliance mandates, suppliers and information flows multiply, supply chains are becoming more complex, costly and vulnerable. • Flooded with more information than ever, supply chain executives still struggle to ‘see’ and act on the right information and rank visibility as their greatest management challenge. executives urgently concerned about risk; risk management ranks remarkably high on the agenda of supply chain executives as well. More than two-thirds of supply chain executives have programmes in place to monitor compliance. However, top supply chains are taking risk management a step further by incorporating it into their plans and using IT to monitor and act on disruptive events. Interaction with customers: Despite demand-driven mantras, companies are better connected to their suppliers than
ACT Given the growing interdependence among economies worldwide, it is no surprise that globalisation ranks as a top supply chain challenge. Many companies are encountering issues with global sourcing, including unreliable delivery (65 per cent), longer lead-times (61 per cent) and poor quality (61 per cent), with an additional 14 per cent of respondents anticipating such problems within the next three years.
their antidote for cost volatility. Visibility: Flooded with more information than ever, supply chain executives still struggle to ‘see’ and act on the right information and rank visibility as their greatest management challenge. Although more information is available, proportionally less is being effectively captured, managed, analysed and made available to people who need it. Effective use of business analytics could help them share information and collaborate more effectively. Risk: CFOs are not the only senior
their customers. Although technology has made it more feasible than ever to incorporate customer input, working directly with customers remains the least common supply chain planning practice. In fact, demand planning at one out of every five companies ignores customers entirely. As pressure to be more profitable grows, supply chains will not be able to afford the excess inventory, lost sales and missed innovation opportunities caused by inadequate customer collaboration. Globalisation: Contrary to initial rationale, globalisation has proven to be more about
revenue growth than cost savings. Given the growing interdependence among economies worldwide, it is no surprise that globalisation ranks as a top supply chain challenge. Many companies are encountering issues with global sourcing, including unreliable delivery (65 per cent), longer lead-times (61 per cent) and poor quality (61 per cent), with an additional 14 per cent of respondents anticipating such problems within the next three years. So far, however, the financial advantages of globalisation of their markets and operations outweigh these negatives. Nearly 40 per cent of supply chain executives report improved margins. Yet, this bump in profits is not necessarily tied to lower costs. In fact, more than one-third of executives are experiencing increased costs, likely because of the global sourcing challenges. Instead, these higher profits seem linked to sales increases, as reported by 43 per cent of executives. These findings suggest that globalisation has contributed more to revenue growth than efficiency. Although higher costs are affecting both high performing and less-effective supply chains, they are less prevalent among top supply chains. Moreover, on the positive side, far more leaders report increased sales and improved performance.
FINDINGS These findings suggest that supply chains – and the executives charged with managing them – are under severe pressure. As compliance mandates, suppliers and information flows multiply, supply chains are becoming more complex, costly and vulnerable. And executives are finding it increasingly difficult to respond to these challenges, especially with conventional supply chain strategies and designs. This is not to say companies have ignored these issues; IBM found no shortage of supply chain improvement projects. However, the research suggests that it is no longer enough to build supply chains that are efficient, demand-driven or even transparent. Companies will need to use machine-generated information; have connection between the entire supply chain; and make decisions through use of advanced analytics, in other words, build ‘smarter’ supply chains. Vivek S Rawat, Country Manager – Websphere – Software Group – IBM India
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WAREHOUSING & DC
WAREHOUSING SAFETY
CREATING A
ZERO-RISK AMBIENCE Warehouse is an integral part of logistics activities. As an industrial facility that receives and stocks many types of products, and then transports it to various locations, it evokes the image of a simple operation–moving materials around with forklifts, powered hand jacks, conveyors or by hand. Thanks to this image, warehouse employees often develop a false sense of safety. With no dangerous machines or high-risk operations to consider, many fail to see the need for a sound safety programme. To improve warehouse safety, employers should focus on different areas of operations and take steps to improve employee training, enforce safe practices and implement appropriate corrective action.
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LOADING DOCKS
BY nature, a warehouse is a busy place, and such fast-paced productivity often leads to injuries. Therefore, where safety is concerned, warehouse management must do more to protect employees. However, here the questions arise as to how to achieve a safer work environment and enhance worker safety; what programmes can be implemented to comply with safety regulations and follow sound work practices. Here are some of the focus areas.
Employees and visitors can easily fall off a dock. Due to operator error, a piece of powered equipment (such as a lift truck) may drive off a dock. If a tractor prematurely pulls out with a trailer, the lift truck and operator may crash to the dock floor, which could result in serious injury or death. A lift truck could also skid off the dock as a result of contact with a slippery surface. Products stored or being moved can easily fall (on someone) if not stacked properly. Moreover, these can be damaged by a lift truck’s forks or rear-end swing. In addition, sprinkler heads may be struck by loads being lifted; the resulting water flow may damage products. Clearly, the hazards are many. Losses may arise due to injury, downtime, product damage and missed shipments. To enhance dock safety, management can take several steps. • Paint the dock edge yellow to provide a better visual perception of the hazard. • Require wheel chocking at every bay door. When a trailer creeps or pulls out prematurely, the lift truck may fall between the trailer and the dock floor, leading to serious injury or death. • Verify that ladders from dock surface to dock well meet OSHA specifications. In addition, management must prohibit dock jumping, which can lead to serious ankle, knee and back injuries. • Provide proper illumination for exit doors. Such doors should also feature an exit sign and be equipped with emergency lighting. • Allow only trained, authorised employees to operate powered hand trucks or hand jacks (also called walkies). Although these devices appear easy to operate, they actually pose hazards similar to those of forklifts. These units turn in a small radius, which can trap the operator’s hand between the operating handle and a fixed object (such as storage racks). • Inspect the dock area daily to ensure that fire extinguishers are not blocked (by some obstacle) or damaged. • Make sure that the dock plates are designed for the loads and lift trucks that will use them. Attempts to manually place portable dock plates
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can lead to back injury. Some portable models have built-in handles and can be mechanically lifted using lift truck forks. Install dock plates with non-skid surfaces. Use yellow edging on fixed plates to help operators gain perspective on distance while driving on them. Colour highlighting also helps prevent operators from driving off the side. When dock plates need repair, rope off the surrounding area and post appropriate signage. Clean out dock areas periodically in order to remove accumulated debris. Paper, wood and other combustible materials may fall into the holes along the open sides of dock plates, which pose a fire hazard. Identify overhead pipes and highlight them with colour. Install barriers to protect pipes or other building structures that can be struck by a lift truck or load. Wherever possible, paint these barriers yellow. Inspect the integrity of trailer floors before a lift truck is driven onto them. Support the trailer’s nose if the base is poor, landing wheels are defective or the trailer is leaning. Also, inspect trailer wheels to make sure that they are properly located and lockedin-place to prevent the trailer from tipping.
POWERED INDUSTRIAL TRUCKS Powered industrial trucks are a key component of the material handling process in a warehouse. These vehicles are also dangerous. A lift truck has a high centre of gravity, turns more sharply than an auto (because its rear wheels do the steering) and may weigh three to four times more than an auto. All of these factors contribute to forklift tipover. Management can implement additional safeguards as well. • Install back-up alarms on trucks, which can prevent many struck-by or caughtbetween injuries. Typically, alarm volume may be adjusted, so it poses no nuisance to those nearby. Evaluate the working area to make sure the alarm acts as a warning device and does not confuse employees. Flashing lights can also aid safety. Like back-up alarms, lights should act only to warn (not annoy) others.
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Warehousing safety, continued
• Equip trucks with rear-view mirrors that are convex or panoramic in design to give operators the best view possible. • The goal of these safeguards is to aid operators and alert others to the movement of powered equipment.
CONVEYORS Conveyors are common in the warehouse and distribution industry. Management can enhance conveyor safety via the following safeguards: • Inspect conveyors on a regular basis. The manufacturer or an outside engineering firm can inspect the devices using a comprehensive checklist. In addition, supervisors and safety committee members should conduct planned inspections on a regular basis. • Colour code off/on buttons and ensure easy accessibility. These buttons should be available at various intervals along conveyors. These emergency controls are in addition to controls at the front- and back-ends of the system. Another alternative is to install a flag switch and emergency pull cords along the sides of conveyors. • Develop a means of locking out the conveyor and train employees in these procedures. • Install netting or other protective guarding (to prevent product from falling) on the sides or under conveyors in areas where pedestrians may walk. If employees must cross over a conveyor, provide stairs and railing or enable one section of the conveyor to fold up in order to accommodate access. Climbing onto or over conveyors must be prohibited. • Install a shutoff device (in the form of electronic sensors or sensitivity wires) to prevent over-stacking and falling product at the ends of conveyors. Over-stacking exposes employees to manual material handling, which can cause productivity problems and product damage. • Focus on pinch points unguarded drive sprockets and drive belts during conveyor inspections. Colour code guards with yellow paint to increase awareness. • Post signage, and install alarms and warning lights to alert employees when the system starts or stops. Make sure light-beam switches and emergency
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controls are fully functional. • Provide proper lighting and working surfaces in the area surrounding the conveyor. Special floor mats can enhance employee comfort. Verify that conveyor height is adjustable at both the feeding and removal end to accommodate employee height. Adjustable pallet stackers further reduce the need for bending and lifting. • Use portable conveyors that are designed to roll into place. If a conveyor must be manually lifted, train employees to seek assistance (e.g., a lift truck) in order to avoid injury to the back, foot or hand.
MATERIALS STORAGE A warehouse provides a building where product and materials are brought in, stored and later retrieved for shipment to another location. Product movement and storage pose risk to all present. To improve safety and productivity, employers should take the following steps: • Visually inspect pallets as they arrive and remove those in poor condition. Loads can fall from racking or storage if a pallet breaks. Also, lifting a bad pallet that is loaded can cause products to unexpectedly fall on employees. • Stack loads straight and evenly. Place loads directly on racking. Correct loads that look out of balance. • Wherever possible, shrink-wrap loads or place plastic or metal banding around them. A secure load helps protect lift truck operators. • Place yellow protective posts or barriers at the ends of racking to prevent damage caused by lift truck movement. • Space racks so that pallets being handled cannot damage other loads. Spotting a load on one side of a rack could easily push the adjacent load into the next aisle perhaps onto unsuspecting employees. • Provide sufficient space so lift trucks can turn properly and safely, without damaging storage racks. • Make sure floor surfaces and aisles are smooth and free of ruts, debris and slippery surfaces (e.g., oil, chemicals, fluids, water), which may hinder operators’ ability to stop powered equipment. In addition, the jarring motion of a forklift operating on a poorly maintained floor can seriously
injure operators’ legs and back. • Store products on shelves, not in aisles or on the floor. • Store low-sales (infrequently handled) products out of the way. Place products that are regularly handled (manually) on shelves that are knee high and not above shoulder height.
MANUAL MATERIALS HANDLING Manual materials handling can easily produce back and hand injuries. In fact, back injuries result in the most expensive claims within industry. • Develop employee awareness regarding pinch points. Hand traps can occur while setting down heavy boxes; working near pulleys in conveyor belts; adjusting lift truck forks; operating walkies; shutting trailer doors; and manually handling product. Proper-fitting gloves provide additional protection. • Identify fixed pinch points (e.g., the two horizontal doors that come together on a freight elevator) with yellow paint or black-and-yellowstriped tape. Post appropriate signage as well. • Place guards on any moving gears or hazardous rollers to protect hands and other body parts. • To ease manual lifting, add handles to containers. Train employees in proper lifting techniques bend at the knees, keep close to the load, and use the arms and legs to lift. They should also know how to shift feet not twist at the waist when turning with a load.
CHARGING STATIONS FOR EQUIPMENT To allow powered equipment to function, a refuelling or recharging area is needed. Units may be powered by gasoline, diesel, liquid petroleum gas (LPG), compressed natural gas (CNG) or battery. Thus, in areas where vehicles are refuelled or recharged, management must exercise special care to reduce the risk of fire and explosion. Some guidelines follow. • Ensure that refuelling systems are professionally designed for the specific risk. The manufacturer should provide guidelines regarding system design or safety features. • Prohibit smoking and open flames in and around charging stations and post signage reinforcing these restrictions. Ensure that fire extinguishers are
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readily available and fully charged. Dry chemical or CO2 are the most effective extinguisher types. In addition, automatic fire suppressant discharging systems (such as CO2) can facilitate effective response during an emergency. Consult with the local authorities to determine the required distance (based on fire codes) between the filling station and a building structure. Verify that safety devices for vapour recovery, flash arrestors, automatic shut-offs, etc., are in place and in good operating condition. Equip battery-charging areas with an eyewash unit that will provide at least 15 continuous minutes of running water. Depending on the potential exposure, a full drench shower may also be required. Post information about extinguisher placement and job hazard analysis near the chargers, along with an informational placard from the battery company. Provide equipment to protect against battery acid (e.g., rubber gloves, rubber apron, goggles, face shield and rubber boots). If LPG trucks are used, provide appropriate gear for changing tanks. Mount circuit breaker boxes or wall disconnects near chargers (should
they need to be shut off in the event of emergency or maintenance). Properly identify boxes or controls and indicate voltage. Enforce lockout/ tagout procedures. • If cranes or hoists are used to handle batteries, inspect cranes and hoisting slings. Ensure that hook latches and appropriate PPE are available. In addition, a competent person (preferably from a crane firm) must inspect the cranes each year.
FIRE SAFETY Many warehouses are protected by automatic sprinkler systems. As noted, management must be sure that the products stored can be extinguished by this system should a fire occur. Management should take the following steps to make sure a warehouse is protected against fire. • Inspect sprinkler systems and conduct flow and alarm testing each month. Inspections need to be documented. Having professionals periodically evaluate the fire prevention system and complete a facility emergency plan will pay dividends. • Store all flammables and plastics according to code. Plastics fires are much hotter and may render a standard sprinkler system ineffective.
Focus Areas: Statistics indicate that certain areas or operations within a warehouse present greater hazards than others. The following operations have historically contributed to significant numbers of injuries and are considered to be the most hazardous: • docks, • powered industrial trucks, • conveyors, • materials storage, • manual lifting/handling and • charging stations. Other serious problems include: • inadequate fire safety provisions, • chemical exposure, • improper use of lockout procedures, • lack of ergonomics and • failure to wear personal protective equipment. To improve warehouse safety, employers should focus on these areas and take steps to improve employee training, enforce safe practices and implement appropriate corrective action.
• Inspect fire hoses and extinguishers regularly. Remove any obstructions and make sure these items are readily available. Only employees trained in appropriate firefighting techniques should handle this equipment. • Perform annual fire drills and practice emergency drills. Post large emergency evacuation maps throughout the facility. • Develop an emergency plan that assigns specific tasks to certain employees. • Train all employees in basic principles of firefighting including how to identify fire types and use extinguishers. Local fire departments or firms that provide extinguisher recharging services can provide onthe-job training. • Maintain fire alarms, smoke detectors and emergency lighting in proper operating condition.
CHEMICAL EXPOSURE Chemical exposure is not unusual at a dock. For example, a lift truck fork could easily puncture a container holding solvent with a low flashpoint, which may result in fire or explosion. Containers may be damaged if dropped. Other exposures range from everyday use of chemicals to battery acid. To protect employees, management must take several key steps. • Provide information (at least MSDS) for each chemical in the facility. This is best achieved by filing MSDS in binders and storing the binders in key locations Chemical manufacturers must provide this information to the purchaser (warehouse). The purchaser must also provide MSDS to new purchasers of products from the warehouse. • Maintain a master chemical inventory and number each chemical. A matching number should accompany each MSDS (using tabbed reference sheets). • Provide spill clean-up kits in any area where chemicals are stored. For example, a battery acid spill is foreseeable in the battery-charging area. Therefore, a clean-up kit should be available. • Develop and implement a written spill control plan. Train employees to clean up spills, protect themselves and properly dispose of used materials. • To minimise risk of container damage,
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store chemicals safely and securely. Do not stack heavy loads atop small chemical-holding containers, because the weight could easily crush the smaller containers. Where possible, store chemicals away from lift truck traffic areas. • Provide PPE and enforce its use. • Monitor and control carbon monoxide (CO) exposure caused by use of propane-powered lift trucks. To prevent exposure, use batterypowered equipment. If this is not possible, tune-up propane trucks or add catalytic converters to reduce CO from combustion engines. In addition, install CO alarms and test air quality on a regular basis (with calibrated instruments).
LOCKOUT/TAGOUT PROCEDURES Various machines, devices and operations in a warehouse present the need for a zero-energy state and, thus, the need for a lockout/tagout (LOTO) programme. Employees required to perform LOTO should be thoroughly trained, and all employees should have (at least) working knowledge of the program. Following are examples of situations that may require LOTO: • A malfunctioning conveyor requires maintenance. Pull down the disconnect that powers the conveyor, and lock & tag it. Mark the disconnect box to identify what it controls and its voltage. The conveyor could also be locked out via the circuit breaker box. Here, label each disconnect switch properly. Close the box door and key lock it after moving the switch to’off’, or place a LOTO attachment on the switch (in the off position). • A forklift needs brake repair. Safely park the unit in an approved area, remove the key and add a tag that identifies who locked it out, when and why. For additional safeguarding, turn off the propane tank valve or disconnect the battery (depending on the model). • Several employees have received electrical shocks from a large floor fan. Pull the plug, place a cover over it, and add a lock and tag. This prevents the defective fan from being plugged in. • A battery charger begins to emit smoke. Pull the proper disconnect switch and add a lock and tag. This is why each
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disconnect box should be marked to match the appropriate battery charger. Alert the maintenance department to schedule corrective action. To ensure that LOTO procedures are properly executed, management should take the following steps. • Identify circuit breaker boxes (on the outside) by number or letter code; this makes it easier to locate. Inside each box, test individual switches to verify what they control, then label them accordingly. Also, ensure that the panel contains no openings which expose employees to live current, and install barriers (rails or guards) to protect power panels and boxes against impact by powered equipment. • Practise specific lockout procedures. A LOTO photo book is an excellent training tool. In addition, listing all LOTO procedures increases effectiveness. Review the programme annually.
ERGONOMICS Ergonomic improvements are designed to make jobs less stressful. Often, minor changes can have great impact. • Store heavy materials that must be manually lifted on shelves that allows lifting to take place between the knees and chest. If possible, use powered equipment instead of requiring a manual lift. • Position picking bins waist or chest high and tilt them for maximum access. Eliminate or tape sharp edges on containers in order to prevent cuts. Where parts must be lifted in individual containers, do not store containers on the floor or overhead. Add handles to ease lifting. • Ensure that overhead lighting is appropriate for the task at hand. Replace burned out bulbs and clean globes or reflectors. Increase illumination in areas that require a greater degree of accuracy in parts or product selection. • Employees working on a mezzanine, gates (that must be manually moved to an open position in order to accept product) face a serious fall hazard. To prevent this, install a mechanical sliding gate equipped with a drive motor (like that on a garage door). To use such a device, the forklift operator pushes a button mounted in the lift truck, and the door slides open so the load can
be deposited properly. She/he then pushes the button again, and the gate closes. A flashing red light increases hazard awareness when the gate is open. • Ventilation is critical. Carbon monoxide and other gases, fumes, vapours, mists and dusts must not exceed permissible exposure limits. General ventilation should provide the proper amount of air exchange and create a draft (in warm weather when doors are open). Local ventilation may be needed in areas above battery-charging or similar exposures.
PERSONAL PROTECTIVE EQUIPMENT Management must conduct a site hazard assessment to determine what PPE must be worn, based on hazards present. In addition, employees must be trained regarding proper PPE selection, use and maintenance. General guidelines follow. • Provide hard hats to all personnel. Products can easily fall off a rack or shelf and strike an employee’s head. When moving products under racking, an employee could easily strike his/her head. • Require foot protection where appropriate. Steel-toe shoes protect feet against falling product or when caught between two objects. Such shoes also protect the feet while operating powered pallet jacks, stock chasers and similar equipment. • Require eye and face protection for employees who sweep, cut metal or plastic banding, handle wire strands or perform maintenance. • Provide appropriate gloves to protect against sharp, hot, heavy and chemically unstable products. Depending on the hazard, gloves may be leather, rubber, cotton or other material. Thus, glove selection should be based on the exposure. • Where necessary, provide hearing protection (e.g., ear plugs or ear muffs). Since worker acceptance of this equipment depends on the comfort it provides, workers should be involved in its selection. Jörk Cardeneo, Project Manager, Messe Düsseldorf GmbH E-mail: CardeneoJ@messe-duesseldorf.de
LEADERSHIP SERIES MCNALLY BHARAT ENGINEERING CO
ENGINEERING A BETTER TOMORROW WITH IDEAL SUPPLY CHAIN INFRASTRUCTURE Characteristically, engineering, procurement and construction (EPC) projects are beset with high task uncertainties, activity fragmentation, phase overlaps and waste of time & resources. However, these complexities thin-out with the introduction of discipline and proper planning in the supply chain matrix of EPC projects. Embracing these best practices in every subsystem of its supply chain, McNally Bharat Engineering Co, today ensures timely completion of infrastructure it builds for a better tomorrow. PRERNA SHARMA & ESTHER BARDHAN HAVE you been brooding over the number of EPC projects, sitting on heaps of waste due to malfunctioning in one or more interdependent supply chain subsystems, present in the entire supply chain of an EPC matrix? Do you count the cracks that appear in EPC contracts due to phase overlaps, work fragmentation, complex organisational structure and inaccurate prediction of desired outcomes, crumbling the skeleton of an EPC contract? Stop counting cracks and start viewing the importance of procurement and logistics to meet onsite requirements as a major area of
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constraint and opportunity, which needs to be strategically tapped to build supply chain pillars for EPC projects. Engineering, procuring and constructing along the same model, McNally Bharat Engineering Co. (MBECL) has been ensuring timely procurement and supply of right quality materials and equipment to various sites.
THE BARE ESSENTIALS Every EPC project has to bear the burden of big cargo. Owing to their dimension, it is often inconceivable to break the ‘hulk’, transport it in pieces and get those pieces finally assembled on the
site. Transportation of materials of height exceeding 5 metre, even on a low-bed trailer, is generally restricted. To say the least, rail-gates, welcome signs, overhead conveyors, etc. over the roads interrupt smooth transportation of the cargo. To top it all, narrow Indian roads add to the constricted movement of trailers that are already moving at a cautious pace due to the burden of wide-equipment cargo. The plight of project cargo carriers does not end there– it intensifies while clearing waybills at inter-state crossings. While it is wishful thinking to expect a drastic change in the existing scenario, employing
time-tested practices to deal with it can benefit project execution companies a great deal. While McNally established over 300 plants until March 2009, carrying million tonnes of project cargo and delivering them on time at those plant sites was not a smooth drive for its logistics arm. However, at a very early stage, McNally’s SCM department mastered the art of mustering over-dimensional project cargo, co-ordination with critical subvendors and vendors, and outcomes of project changes. Here’s how the company has been leading by example since its establishment in 1961, despite the challenges posed by the nature of operations and other external limitations.
CHALLENGES Efficient handling of supply chain requirements was a matter of concern for the company. Apart from infrastructural bottlenecks, loading and unloading of cargo were posing challenges for McNally Bharat. Besides, due to the unavailability of handling materials with vendors, equipment were loaded on trucks & trailers in a very unscientific way. Apart from these, the company faced challenges in maintaining short lead-time to deliver quality products & services, integrating information & distribution, selection of logistics service provider for timely completion of projects with customer satisfaction. Not only this, natural calamities also posed a threat to efficient supply chain management of the company. Elaborating on the same, Debaprasad Dasgupta, Associate Vice President – SCM, MBECL, Kolkata, informed, “Recently, truck movements from South India to major sites in North India were interrupted due to heavy flood in Andhra Pradesh as well as agitations in that state emerging from issues related to the creation of a separate state. In such eventualities, we could do precious little except waiting for the situation to appease.”
IMPROVING PROCUREMENT PERFORMANCE Having faced such major challenges, McNally Bharat has been in constant pursuit of sorting out these issues. To this, Dasgupta avers, “We have been able to ensure supply chain efficiency and customer satisfaction through integrated performance measurement at each stage
Ash Silo, CESC
by continuous evaluation and analysis of the data/information. This evaluation was aimed at improving ordering time, data of product of goods & services, reducing cycle time for delivery of products of goods & services, correct sourcing of the raw materials & transportation. It also aimed at making investments at right time before price rise of raw materials, implementing effective information
truck/trailer movement is also a matter of prime concern. Nowadays, most of the drivers carry mobile phones and interacting with them through the transport agents must become a practice. Particularly, if the movement of the vehicles does not match logical expectations, immediate tracking down is required. Another important thing is to have the road survey done, before initiating transportation. Quoting
We ensure proper supply chain management based on our review by proper planning & control, implementation of flow of information through ERP system using proper network and manpower. Knowledge, co-ordination and continuous process improvement by accepting suggestions of customers and taking long-term vision is a culture in MBE. DEBAPRASAD DASGUPTA,
ASSOCIATE VICE PRESIDENT – SCM, MBECL, KOLKATA
management system to shorten cycle time & better responsiveness, improving team efforts, so that the best output is achieved by the organisation.”
OVERCOMING TRANSPORTATION HURDLES For an EPC like McNally, after the permission is granted to the vendors for dispatches, other key functions that had to be executed in an effective manner included proper packing, obtaining the transport, loading the consignment on the transport scientifically and in serial order for proper storage at site. Monitoring of
an instance, Dasgupta states, “Recently, a very big consignment from McNally took about 4 months to reach from Pune to Asansol because of misunderstanding, when we did not find it essential to judge the route of movement by avoiding the possible hindrances on the road.” To help sort out the issues related to transportation, the company deployed project management tools like Prime Vera software package, which identified the critical path from the input data based on the customer contract, given at an intermediate stage. Talking on logistics planning, Dasgupta adds, “If we can plan
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Leadership series, continued
The criteria for selecting a logistics partner • Trustworthiness • Abreast with latest trends • Quality • Reduction in supply chain management cost • Better return on the working capital.
the company has adopted various entry strategies through exporting, joint venture & ownership. All these give a price advantage by reducing the cost of transportation & shipment from domestic manufacturing facility, order booking, to availing of various incentive schemes.
BUILDING ON THE KEY LESSONS Some of the key lessons that the SCM department of McNally learnt over the years and implemented as best practices to consolidate the interdependent links in the supply chain of its EPC matrix are: • Maintaining scheduled delivery and improving customer service • Analysis of internal and external information required to flow within the organisation • Monitoring business input service provider to increase efficiency of EDI
our transportation requirements well in advance, we can get rid of several hindrances. This is essential when we lift materials from big cities like Kolkata, Delhi, Bengaluru, Mumbai, etc. In these cities, entry of cargo vehicles during daytime is invariably restricted. Therefore, we have to ensure placement of vehicles, arrange loaders along with cranes, etc., temporary lights, including bringing the trucks or trailers outside the city limits.” Few of the best practices adopted by the company are: • Management of the bought-out items, raw materials, products, services & information • Transportation & distribution of the products and raw materials for multi3000 TPH Stacker Reclaimer, Paradip Port Trust location sources system • Cost-effective flow of goods and its • Reducing the lead-time at each stage control through analysing the existing data • Planning and organising activities of • Reducing the idle time products & services. • Increasing the infrastructure and inSTRENGTHENING SUPPLY CHAIN house facility through automated INFRASTRUCTURE storages and retrieval system The company has integrated information • Minimising the inventory of raw management system through enterprise materials resource planning (ERP), which has • Reducing the scrap automated business function and • Advance buying before price increase integrated department & data across the • Proper multiple site activity, planning, company into a single computer system. control and co-ordination. It has removed the barriers between TOOLS FOR AN IDEAL SUPPLY the departments, aided correct pricing CHAIN INFRASTRUCTURE IN INDIA during tendering, eliminated errors Ideal infrastructure that India should have during ordering with regard to quantity cannot be uniform and same for the & quality, scheduling of delivery, which entire manufacturing project and service has ultimately increased the returns on sector. As Dasgupta puts it, “It depends investment (ROI), responsiveness and on the nature of the job manufacturing competitiveness of the organisation. by the unit, and the nature of the services, In the context of internationalisation,
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provided by the particular service sector. The supply chain infrastructure will be on a case-to-case basis.” Dasgupta, however, summarises common instruments that are applicable for all the industries as follows: • Supply chain people should be specially trained on materials management, cargo management, transportation, shipping, inventory management, international business, etc. • Segmenting the customer on the service needs should be developed and hence SBU concept has developed • Logistics network has to be customised • Integration of all functions through transparent electronic database system and hence ERP • Liberalisation of government policy and procedure • Uniformity in all state regulation & taxes • Signals of market price demand should be transmitted properly • Government body/independent body should regulate pricing strategy of the raw materials • Multimodal transport facility should be more economical • Introduction of barcode technology, which increases the data accuracy and reduces idle time, improves scheduling & customer service • Financial stability of the software firms for maintaining decision support system • Network connectivity • Supporting & encouraging e-commerce activities within the country • Digital libraries • Geographical information system implementation.
ENHANCING PROJECT PERFORMANCE WITH BEST PRACTICES By bringing discipline in planning and execution, reducing wastage of time and resources, synchronising project schedules, planning for uncertainties and enhancing customer satisfaction, McNally Bharat Engineering not only got over the challenges but also improved the productivity and profitability of its EPC projects. Taking a holistic view of its project matrix as subsystems associated with risks caused by time and resources, the company today leads with both logic and culture in its supply chain architecture to enhance project performance.
DOCK LEVELLER EQUIPMENT UPDATE
Dock levellers are used to equilibrate the height difference between the bed of a forklift truck and the floor of a loading dock. However, differences in trailer dimensions and floor levels make dock levellers more critical for safe dock operation. Therefore, emphasis must be given on purchasing the right kind of dock leveller that is designed as per the industry norms and is integrated with restraint mechanisms. Besides, regular maintenance of dock leveller will ensure that the device operates in a safe manner. Here are 25 tips that will enable operators to lock safety with their dock levellers.
THE dock levellers are steel platforms connecting the dock (to which they are hinged) to the truck bed of the vehicle, allowing the forklift trucks to load the goods by mounting on to their surface. During all the loading operations, the dock leveller acts as an inert bridge. It follows the lifting and lowering of the bed of the vehicle on its suspensions, under the mass of the load and the load of forklift truck. Since the dock leveller performs the critical function of carrying the truckload, its selection should follow careful evaluation of certain parameters.
SAFETY PARAMETERS FOR DOCK LEVELLER SELECTION AND OPERATION The dock levellers must conform to several norms. While purchasing these dock levellers, the buyers must obtain the relevant certifications from the manufacturers. Buyers should also obtain photocopies of tests conducted in specialised laboratories to check the authenticity of certifications accredited by the manufacturers for the dock levellers. These checks will enable the buyers to gauge the level of operational safety of the dock levellers that are under the ‘machine Directory 89/392 CEE and further updating.’ Besides the norms, the buyer must consider the following points for ensuring safety of dock leveller during operation:
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CARRYING CAPACITY
The nominal carrying capacity of dock leveller is considered as concentrated when the weight is on 1 axel of the forklift truck, and discharged on 2 marks of 15×15 cm at 1 m of distance.
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PAY ATTENTION TO THE OVERLOAD FOR ‘ROLLING’ The carrying capacity of a dock leveller is to be reduced if the use of forklift trucks with smaller wheel marks 15x15 cm is foreseen, e.g. a. If the forklift truck has Vulkollan wheels of diameter 35 cm x 10 cm (2 marks of 50 cm2), the carrying capacity must be reduced from 6.000 kg to only 2.635 kg. b. If it is a transpallet with tandem wheels diameter 8 cm and width 10 cm (4 marks of 20 cm2), the carrying capacity must be reduced from 6.000 kg to 3.294 kg c. If it is a transpallet with single wheels diameter 8 cm and width 10 cm, then the carrying capacity should be reduced from 6.000 kg to 2.266 kg.
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WIDTH OF THE DOCK LEVELLER
FOOT GUARDS AND FINGERS DISTANCE
The width of dock leveller should be similar to the width of the truck-beds, extending at least 35 cm between the external wheel of the forklift truck and the rim of the dock leveller. Therefore, buyers should always choose dock levellers of 220 cm width, with side flaps on the lip.
Side foot guards are necessary in order to cover the gaps between dock and dock leveller. The lip in rest position must have at least 25 mm of distance horizontally or vertically from possible frames.
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SIDE STEP EVIDENCE
MAXIMUM WORKING SLOPE The slope should be kept up to 8-10 per cent. The working slope must be in line with the one that the forklift truck can overtake. For example, many electric transpallets do not overtake more than 4 per cent of slope at full load.
QUICK TAKE
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The side step of the dock leveller and its distance from a possible pit must be highlighted with yellow-black strips (5 cm of height is sufficient).
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USAGE INSTRUCTIONS AND/OR IDEOGRAM INDICATIONS
• The dock levellers must be designed in a way to prevent non-intentional movements during the loading process. The usage of bolts, bars or teeth can engage the rim of the dock levellers in a manner that they remain in their positions while loading.
The commands must have brief instructions. The instructions should be conveyed through ideogram to enhance tiers’ clarity.
• The dock levellers must be provided with a safety crutch and a positive clamping, in order to maintain them in a secure position during maintenance.
The dock levellers must be provided with a safety crutch and a positive clamping, in order to maintain them in a secure position during maintenance.
• The unsupported dock levellers must have automatic safety system. These systems should have the capacity to block operation in case it becomes dangerous and uncontrolled. An automatic valve directly inserted into the lift cylinder can achieve this result.
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MAINTENANCE CRUTCH
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EMERGENCY SWITCH The command board should be equipped with an emergency switch, whose function can be taken by the door block switch as long as it is of red colour on yellow background. The main power supply must be lockable in the OFF position for maintenance.
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SURFACE OF THE DOCK LEVELLER
EMERGENCY STOP
The surface of dock leveller must be anti-slippery, and it must be easy to clean without retention of liquids. Therefore, buyers must look for dock levellers with surface made of anti-slippery almond steel sheets.
All the automatic movements of the dock leveller should have auto off options in case of casualty.
6
BLOCKING IN REST POSITION The dock leveller inside the dock must be designed in a way that, in rest position, it is at the same level with the pavement, and must be automatically supported in a manner to allow crossing without risks also at full load.
7
SIDE INCLINATION The lip of the dock leveller, laid on the truck bed, must follow the side inclination. All vehicles currently manufactured have thick torsion bars, which limit the side inclination to 7-8 cm maximum.
64 • SMART LOGISTICS • JUNE 2010
COMMAND SYSTEMS These command systems must comply with prEN 954-1-1996 category 2. The commands must be designed in a way that, if released, the dock leveller blocks or lowers by gravity at a speed not exceeding 15 cm per second, measured on the external rim, lip side. The commands must be designed and marked in a way that the functions are easily understandable. In addition, they must be made in a way to avoid possible non-intentional movements.
15
PREVENTION OF NON-SUPPORTED OPERATIVE POSITION The dock levellers of a mechanical type must be designed in a manner such that they cannot remain in a horizontal unsupported position.
16
21
AUTOMATIC SAFETY STOP
MANUAL OPERATIONS
The unsupported dock levellers must have automatic safety system. These systems should have the capacity to block operation in case it becomes dangerous and uncontrolled (for example in case of an accidental departure of the vehicle). An automatic valve directly inserted into the lift cylinder can achieve this result. The safety block must work only with a load superior to 10 per cent of the maximum capacity. In case of a dock leveller with reduced height due to reduced space, if the cylinder has to be sensibly inclined, the value may be brought to 25 per cent. The value has to be specified by the manufacturer. If a dangerous descend begins, the dock leveller must: - Either block within a distance of 20 cm, measured on the outside rim of the dock leveller - Or reduce the descend speed to a maximum of 5 cm per second.
A platform that can be moved by one person must not exceed 300 N in weight. If transported by two men, it must not exceed 600 N. All the platforms above 600 N must be equipped with a system that allows for their handling with a force not exceeding 300 N, or have systems allowing handling with mechanical means. The ramps that are anchored at the dock rim must not require more than 300 N of manual force for their manoeuvre. The same applies to the mechanical ramps.
17
22
INFORMATION FOR USE The dock levellers must be supplied with compulsory marking and written instructions for use, including installation, electrical scheme, operations, maintenance and inspection, all in the official language of the country of installation. Marking must include manufacturer or supplier, country of the manufacturer or supplier, type, production number, year of production, nominal load, etc.
23
HYDRAULIC AND PNEUMATIC A pressure valve, adjusted to a maximum 115 per cent of the working pressure, must protect the circuit. The hydraulic cylinders must resist to at least twice the working pressure without permanent deformations. The pipes must resist at least three times the maximum working pressure and must be installed in way that it operates without bents and frictions. The parts subject to the pressure generated by the safety stop must resist to this pressure.
18 19
CYLINDERS They must be installed effectively to receive only axial loads, they must not lower under the platform during the work.
INSTRUCTION FOR USE The instructions must contain all the details necessary for safety application regarding the purpose of the product, its initial start, the use, functions and mistakes during the operations and the essential instructions for safe operations. The instructions must also indicate the following: • Restricting usage of dock leveller above its carrying capacity • Restricting usage of the dock leveller above its allowed slopes • Not to position the vehicle at more than 20 cm from the dock for the small platforms and ramps • Restricting usage of forklift trucks that are wider than specified dimensions • Fixing the platform during use in order to safeguard against non-intentional movements.
24
SHORT-OPERATIVE INSTRUCTIONS
DOCK LEVELLERS ANCHORED TO THE DOCK RIM They must resist, in their vertical resting position, to a wind pressure or to an occasional shot of 1.0 kN/m2 in both directions. The impacts of the vehicles must not to be taken into consideration. They must be provided with a secure blocking system, which will block them automatically in vertical position. The blocking system must be designed in a way that it can be only intentionally unblocked.
20
PREVENTION FROM NON-INTENTIONAL MOVEMENTS The dock levellers must be designed in a way to prevent nonintentional movements during the loading process. The usage of bolts, bars or teeth can engage the rim of the dock levellers in a manner that they remain in their positions while loading.
These instructions should be kept in a visible place, preferably near the operator in the same language as the place of use or with ideograms.
25
INSTRUCTIONS FOR MAINTENANCE AND INSPECTION The manufacturer must supply instructions for maintenance. Maintenance has to be done by a competent person at regular times. If the maintenance is made underneath the dock leveller, it has to be blocked with its support leg. The fixed dock leveller must be inspected by a competent person before the beginning of the operations, at least once a year and after major repairing. A visual inspection must include possible damages, functional trailers, totality of the security systems. Courtesy: Gandhi Automations
JUNE 2010 • SMART LOGISTICS • 65
PRODUCT & ADVERTISERS’ INDEX
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Products
Pg No
Barcode & rfid technologies ....................................................................................................................................................................................................................................................49 Cemat India .......................................................................................................................................................................................................................................................................................59 Cold form C & Z purlins .............................................................................................................................................................................................................................................................3 Conference - future supply chain strategies..................................................................................................................................................................................................................41 Containerised transportation ...............................................................................................................................................................................................................................Back cover DHL import express worldwide .......................................................................................................................................................................................................Front inside cover Engineering Expo ...............................................................................................................................................................................................................................................................................4 Heavy industrial steel builings ....................................................................................................................................................................................................................................................3 Industrial state directory ............................................................................................................................................................................................................................................................33 Multi level car parks ........................................................................................................................................................................................................................................................................3 Poly carbonate sheets ....................................................................................................................................................................................................................................................................3 Pooling of pallets and crates ..................................................................................................................................................................................................................Back inside cover Pre engineered steel builings .....................................................................................................................................................................................................................................................3 Pre fab shelters...................................................................................................................................................................................................................................................................................3 Residential steel houses ................................................................................................................................................................................................................................................................3 Roof vent ...............................................................................................................................................................................................................................................................................................3 Roofing & cladding sheets ...........................................................................................................................................................................................................................................................3 Sme Expo 2010 ..............................................................................................................................................................................................................................................................................29 Structural floor decking sheets .................................................................................................................................................................................................................................................3 Uss univent ...........................................................................................................................................................................................................................................................................................3 Warehouses ................................................................................................................................................................................................................................................................... Back cover
Pg No
Advertiser
Tel. No.
Website
BIC
Chep India Pvt Ltd
+91-22-67839400
savio.pimento@chep.com
www.chep.com
FIC
DHL Express (India) Pvt Ltd
+91-22-66789186
girish.meghnani@dhl.com
www.dhl.com
4
Engineering Expo
+91-09819430607
shamal@infomedia18.in
www.engg-expo.com
41
Frost & Sullivan
+91-44-42044760
ravinder.kaur@frost.com
www.frost.com/futuresupplychainstrategies
49
Great Eastern Impex Pvt Ltd
+91-124-2347431
sales@geipl.com
www.geipl.com
59
Hannover Fairs India Pvt Ltd
+91-22-40050681
umesh.mandpe@hmf-india.com
www.cemat-india.com
29
INIS Enterprises Pvt. Ltd.
+91-22-28763111
swati@inis-enterprises.com
www.inis-enterprises.com
3
United Steel & Structurals Pvt. Ltd
+91-44-42321801
admin@unitedstructurals.com
www.unitedstructurals.com
BC
Vijay Logistics Pvt Ltd
+91-2135-675000
info@vijaylogistics.com
www.vijaylogistics.com
33
Yellow Pages
+91-22-30245000
yellowpages@infomedia18.in
www.infomedia18.in Our consistent advertisers
FIC = Front Inside Cover, BIC = Back Inside Cover, BC = Back Cover
66 • SMART LOGISTICS • JUNE 2010
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CNBC TV 18
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Second Fold Here
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06 / 2010
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