Smart Logistics - May 2011

Vol. 02 | Issue 02 | MAY 2011

` 100/-

VIEWPOINT

T CEO – Publishing Sandeep Khosla

EDITORIAL Executive Editor Archana Tiwari-Nayudu Features Editor Prerna Sharma Senior Features Writer Sumedha Mahorey Features Writer Sandeep Pai, Sudhir Muddana, Purna Parmar Copy Desk Kimberley D’Mello Product Desk Michael Anthony

DESIGN

he line between disorder and order lies in logistics…and in logistics, the line between moving goods and good moves is what demarcates the leaders from the survivors. It is also a statement of truth that one should be appreciative about the growth sectors, but more importantly, one should be hugely upbeat about the growing sectors, because growth sectors have already established their leaders, but the growing sectors are still on the lookout for their leaders.

Acknowledge and understand that being a part of the supply chain and logistics industry – one of the robustly growing sectors in India and worldwide – the opportunity or the loss of opportunity depends on you and how you align yourself with the growth of this sector. The advantage is for you to take; an option for you to pick whether you want to be the leader or the survivor; and this decision will ultimately decide whether you want to continue moving goods or make a good move!

And just like any other growing sector, the opportunities are scattered everywhere for enterprising logisticians to pick and turn it into fortunes. Take, for instance, logistics parks, which are a towering opportunity for this industry not only to invest in and make profits for themselves, but also to create wealth for the industry and an opportune ecosystem for growth.

Sound policy backing saw investments in logistics infrastructure increasing from $201 billion in the government’s 10th Five Year Plan to $492 billion in the 11th Five Year Plan. And as you read this, there are already leaders-in-the-making in this sector, taking the first move advantage by investing in this segment.

Assistant Art Director Varuna Naik

OF GOOD MOVES & MOVING GOODS

Design Team Sanjay Dalvi, Uttam Rane Chief Photographer Mexy Xavier Photographer Neha Mithbawkar & Joshua Navalkar

PRODUCTION DESK Ambika Karmarkar, Akshata Rane, Dnyaneshwar Goythale, Lovey Fernandes, Pukha Dhawan, Varsha Nawathe, Ravikumar Potdar, Sanjay Shelar, Abhay Borkar

CORPORATE Associate Vice President Sudhanva Jategaonkar Marketing & Branding Ganesh Mahale, Prachi Mutha, Shibani Gharat, Jagruti Shah

CIRCULATION/SUBSCRIPTION Distribution Head Sunil Nair sunil.nair@network18online.com/customercare@infomedia18.in

OVERSEAS CONTACT Ringier Trade Media Ltd

CHINA: 1001 Tower 3, Donghai Plaza, 1486 Nanjing Road, West, Shanghai 200040, China Tel: +86-21 6289 – 5533 Ext. 368, Fax: +86-21 6247 – 4855 (Craig Shibinsky) Email: craig@ringier.com.hk

Take, for instance, DHL, which has already set up a stateof-the-art facility in Sriperumbudur, Tamil Nadu, sprawling over an area of 2,60,000 sqft. The facility offers a variety of services such as warehousing, WMS, Importer/Exporter on Record, in-house customs clearance for incoming & outgoing cargo and assembling of completely knocked down (CKD) and semi-knocked down (SKD) kits. Also, Safexpress has set up its high-tech logistics park in Ahmedabad. Covering a large land area of 2,74,000 sqft, this ultra-modern logistics park provides its clients with cutting-edge trans-shipment and third-party logistics (3PL) services. Then again, around `100 crore has been earmarked by CONCOR for land acquisition and other expenditure for the logistics parks.

Investments by these companies and many such leading companies is proof enough that these high-tech logistics parks, with mechanised handling and intelligent inventory management at strategic locations, are modelled for modern logistics needs. It will not only significantly reduce costs in the supply chain but also give a big boost to the industrial growth of the country.

As India strives to gain leadership position in the global arena, logistics will be the probable wheel on which our economy will roll…and logistics parks, integrating the world of logistics, are shaping itself to play a bigger role in this growth, graduating from the perceived ‘stuffing hubs’ to ‘sought-after-facilities’. Read on to know more about the perks of the parks!

HONG KONG: 9/F, Cheong Sun Tower, 118 Wing Lok Street, Sheung Wan, Hong Kong Tel: +852 2369 – 8788 Ext. 21, Fax: +852 2869 – 5919 (Octavia Au-Yeung) Email: octavia@ringier.com.hk

Archana Tiwari-Nayudu Executive Editor archana.nayudu@infomedia18.in

TAIWAN: Room 3, Fl. 12, No. 303, Chung Ming S. Rd., Taichung, Taiwan Tel: +886-4 2329 – 7318 Ext. 16, Fax: +886-4 2310 – 7167 (Sydney La) Email: sydneylai@ringier.com.hk

BUSINESS OFFICES

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.

AHMEDABAD - Shashin Bhagat Tel: 079-39826432 sipdahmedabad@infomedia18.in

HYDERABAD - Rahul Hanchate Tel: 040-30647600 sipd.hyderabad@infomedia18.in

MUMBAI Tel: 022-30034640 spmktg@infomedia18.in

BANGALORE - Mahadev B Tel: 080-30010900 sipd.bang@infomedia18.in

INDORE - Ameya Gokhale Tel: 0731-3074876 sipd.indore@infomedia18.in

NEW DELHI - Mukesh/Surendra Tel: 011-66303278 sipd.delhi@infomediai18.in

CHENNAI - Harihara Subramania Tel: 044-39864200 sipd.chennai@infomedia18.in

JAIPUR - Durgesh Grover Tel: 0141- 3007414 sipd.rajasthan@infomedia18.in

PUNE - Rohit Dass Tel: 020-33223309 sipd.pune@infomedia18.in

COCHIN - Robin Andrews Tel: 0484-4054380 kochi@infomedia18.in

KOLKATA - Debranjan Sarkhel Tel: 033-2265 8637 sipd.kol@infomedia18.in

SURAT - Sunil Chaporkar Tel: 0261-2630181 surat@infomedia18.in

COIMBATORE - Prakash N Tel: 0422-3092600 coimbatore@infomedia18.in

LUDHIANA - Jasmeet Singh Tel: 0161-3026198 ludhiana@infomedia18.in

VADODARA - Samarth Vohra Tel: 0265-3926500 vadodara@infomedia18.in

MAY 2011 • SMART LOGISTICS • 5

VOL. 02, NO. 02

on

a novon i

MATERIAL

handling

logistics

t

par k

40 17 19 22 25 28

LEADERSHIP SERIES

Logistics & Documentation In Indian Ports Aiming For A Synergy Between Hardware & Software

32

INSPIRATIONAL BENCHMARKS

Enhancing Efficiencies IT Solutions For Visibility Challenges

Distribution Centre Planning How To Choose Right DC Location

6 • SMART LOGISTICS • MAY 2011

INER

ATICS

CONTA

TRADE

56 58

43 44

63

ALSO IN THIS ISSUE VIEWPOINT

5

NEWS, VIEWS & ANALYSIS Latest Happenings In The World Of Logistics

8

NEWS ANALYSIS Skill Enhancement: Training Truckers Of Tomorrow PRICE TRENDS PRODUCT & ADVERTISERS’ INQUIRY FORM

SMART SUPPLY CHAINS Parle Agro Satisfying The Crave For Fresh ‘n’ Juicy

51

TECHNOLOGY TRENDS

PRODUCT & ADVERTISERS’ INDEX Supply Chain Evolution Top 10 Innovations Of All Time

48

WAREHOUSING & DC

INSIGHTS & OUTLOOK

Arshiya’s FTWZ Laying The Foundation For An Impressive Growth

cargo

SPECIAL REPORT

Bharat Joshi, Director, Associated Container Terminals (ACTL)

Perks Of Logistics Parks Aiding Growth, Adding Value

logistics

Indian Steel Corporation Exemplifying Optimal Utilisation Of Multimodal Transportation

VIEW FROM THE TOP

Logistics Parks Ascertaining Unified And Smooth Goods Flow

party

CASE STUDY

Tech Track ‘We will expand on our existing capabilities to gain major marketshare’

third

T E LE

prof it ID i utom toam atio RF er snatisfact

v

n

SYSTEMS

ial

e ehicl

solutions

SYSTEMS

y

FID

WAREHOUSE

cost-effective

GLOBAL

R

erc comm

MANAGEMENT

CVT

ENVIRONMENT fleet management

t

TRANSPORTATION

S

inland connectivity

WAREHOUSE

TEMPERATURECONTROLLED

multi-

GPS modal

GP

S

chU

ma n

a ement ag

bili

GISTICS LO

Y PPL in

CONSUM

India Supply Chain Cost Optimisation Summit SCM Finds A Foot Through Boardroom Doors

identification

ER

flex i

REPORT India – Netherlands Trade Links Leveraging On Their Core Competencies

radio frequency

cus

Supply Chain Transformations Upgrading To The Next Level

37

NOLOGY

e

A large number of Indian organisations today are developing and implementing a comprehensive supply chain strategy and then linking that strategy to deliver bottom line results.

However, owing to factors such as unstable economic conditions and increasing market dynamics, companies, today, have to evaluate the adaptability and efficiency of their supply chain. Bringing in innovation at every stage of the supply chain will offer them a strategic solution, which will not only help them satisfy customer demand, but also help them improve their overall performance and stay ahead in the global marketplace.

CH

infrastructur

Can India Deliver A Better SCM Model?

TE

SL EXCLUSIVE: SUPPLY CHAIN NEEDGAPS

MAY 2011

profit

CONTENTS

15 21 66 67

CORRIGENDUM Mr. Anand Balkrishna, Head BD – SCM, Gati was unintentionally misquoted in the April issue of SMART LOGISTICS about Supply Chain Need-Gaps. His quote is as follows: “Despite forming an integral part of the value add for a product, supply chain seems to be garnering low priority in the organisational strategy. Therefore, SCM should be induced as a fulcrum strategy and investments towards supply chain innovations should be made part of an organisation’s long-term strategies. The learning process can be supported by collaborating with a 3PL or a 4PL, which will invest and work as a partner and will help the organisation focus on brand development. The lop side is that it will incur higher startup costs, but that will eventually recede by joint process optimisation. The learning process can be maintained at a transparent level as a cost-plus model and can be short-term (three years) and then, move in-house; or, it could be a long-term association and continue as a partner arrangement.

The other supply chain challenge lies in the area of regulatory processes and tax loads. In such as scenario, the GST regime will ease out on tax load and shorten the regulatory processes. Also, capacity buildup by the logistics industry is directly proportional to the amount of customer partners available to manage the blue sky in SCM. The derivative effect of the above solutions will help the logistics industry make a planned & right investment. The need of the hour is to stimulate a virtuous cycle of investments and capacity build while mitigating avoidable risks.”

NEWS, VIEWS & ANALYSIS L A T E S T

H A P P E N I N G S

I N

T H E

W O R L D

O F

JOINT VENTURE FOR RAIL LINK TO DHAMRA PORT The rail connectivity to Orissa’s Dhamra Port, a joint venture between Tata Steel and Larsen & Toubro, will be the first such connectivity project in the country under the Indian Railways’ New Railways’ Infrastructure for Industry Initiative (R3i) Policy.

The policy has several objectives such as attracting private sector participation in rail connectivity projects to creating additional rail transport capacity, increasing rail share in freight traffic and making the rail option more competitive for customers by sharing the cost of construction and allowing them to get a share in freight revenues to be generated on the new line. However, the policy shall not be directly or indirectly applicable to connectivity to coal or iron ore mines.

Also, only those lines, which are 20 km or more in length, excluding siding, shall be considered under the policy. Dhamra Port is located 62 km away from the

mainline network of the Indian Railways, but the total track length will be about 120 km because of loops, sidings and various additional facilities. The port has acquired a 125-m wide corridor from Dhamra to Bhadrak, which can accommodate two rail tracks and a four-lane road along with service lines, viz., transmission line and pipelines. Trains will run up to Dhamra Terminal Yard, wherein handing over and taking over of rakes will take place between Indian Railways and Dhamra Port Company (DPCL).

Moreover, the private line model will be applicable to it. There are three other models prescribed under the Indian Railways’ New R3i Policy, viz., cost-sharing freight rebate model, full contributionapportioned model and the SPV model.

Under the private line model, the Railways will share a portion of the revenue (after deducting various charges) with DPCL. The ratio for sharing, however, is still to be confirmed.

‘INDIA SEEKS TRANSIT FACILITY THROUGH 15 ROUTES IN BANGLADESH’ India has sought transit facilities to third countries as well as its North-Eastern states through 15 road and railway routes and ports in Bangladesh. India submitted a proposal to Dhaka seeking to use the road, railway and facilities of Bangladesh’s Chittagong and Mongla ports. “Seeking access to the territory of Bangladesh and its sea ports for the north-eastern regions of India, New Delhi has invited the Bangladesh government to sign a protocol for a period of seven years for the purpose of transit, corridor and use of two ports,” Foreign Ministry officials said.

A Foreign Ministry spokesman confirmed the report acknowledging the receipt of the proposal through the Indian High Commission in Dhaka, saying it outlined broad characteristics on transit and use of ports.

The paper said that the road and rail routes, sought by India in the proposed protocol were – Akhaura-Agartala, Sabroom-Ramgarh, Demagiri-Thegamukh, Bibir Bazar-Srimantpur, Belonia-Belonia, Betuli-Old Raghna Bazar, Chatlapur-Manu, Tamabil-Dawki, Borosora-Borosora, Haluaghat-Ghasuapara, SonamganjShellbazar, Darshanak-Gede, Rohanpur-Singhabad, Birol-Radhikapur and

8 • SMART LOGISTICS • MAY 2011

Benapole-Petrapole. Movement of cargo under the protocol shall be exempted from Customs Duty and other charges, except reasonable charges for the transportation and other miscellaneous charges as are commensurate with the cost of services rendered in respect of such movement.

“Transit fees, if any, to be levied will be decided by mutual consent of both the governments,” the report said.

According to the proposal, Bangladesh Customs could not examine any Indian containerised cargo if it is sealed (one-timelock) but in respect of non-containerised ones, the customs house may make a selective percentage examination of the goods to check if the goods were in accordance with the Customs’ declaration.

The report came days after Bangladesh’s Tariff Commission submitted a set of recommendations on transit facilities for India outlining the proposed modalities and fees for government consideration.

Commerce Minister Faruque Khan said that Bangladesh would soon decide its final stance on fees for transit facilities to India as the issue continued to dominate the center stage of DhakaNew Delhi relations and the country’s domestic politics.

L O G I S T I C S

PIPAVAV SHIPYARD EYES LARGE DOMESTIC DEFENCE DEALS Shipbuilder Pipavav Shipyard is looking to buy overseas firms that cater to the oil and gas and defence sectors and will set up a second dry dock facility to tap the lucrative Indian defence and offshore segments. “We are on the lookout for opportunities. We are very keen, but we must find the right opportunity that will create huge visibility as well as significant value proposition,” said Nikhil Gandhi, Chairman, Pipavav Shipyard.

The firm was eyeing companies in Asia and Europe, especially in the Scandinavian countries, Gandhi added.

Pipavav Shipyard had received clearance from the Foreign Investment Promotion Board for building warships in the defence sector, thus making it eligible to bid for multibilliondollar contracts along with foreign partners.

UNION PACIFIC STEADILY RESTORING FREIGHT CAPACITY Union Pacific’s freight volume is increasing steadily since the depths of the economic recession, but there is no concern in Omaha about ability to handle the growing traffic.

The rail carrier is hiring additional crew and ordering more equipment as it prepares for the 2011 peak season this fall. “It takes on an average 6-9 months to hire and train new workers, 9-12 months for new equipment to be delivered and 18-36 months, or longer, for infrastructure development. So, Union Pacific is moving forward aggressively to prepare for the peak season,” said Diane Duren, VP & GM – Chemicals, Union Pacific.

Union Pacific’s capital investments this year will total $3.2 billion. Although about 50 per cent of the investments will be to repair and replace existing infrastructure, Union Pacific is also adding new capacity.

SHRIRAM TRANSPORT FINANCE EYES ` 21K-CR DISBURSALS, 20 PER CENT GROWTH

NEWS, VIEWS & ANALYSIS L A T E S T

H A P P E N I N G S

I N

T H E

W O R L D

O F

L O G I S T I C S

SOARING EXPORTS BOOST CONTAINER TRAFFIC The tentative traffic figures for major ports for 2010-11, as available with the Indian Ports Association, suggest that containerised traffic by tonnage grew by 12.84 per cent to 114.04 MT from 101.24 MT in 2009-10. The growth was smaller for TEUs – about 9.37 per cent at 7.53 million TEUs, up from 6.89 million TEUs, during the period.

Jawaharlal Nehru Port Trust (JNPT), the country’s largest container-handling port, achieved a growth of about five per cent at a throughput of 4.27 million TEUs over last year’s 4.09 million TEUs. APM Terminals, Maersk’s port operating arm, runs Gateway Terminals International (GTI) at JNPT. GTI’s volume increased to 1.85 million TEUs, up from 1.78 million TEUs the year before, while DP World’s Nhava Sheva International Container Terminal throughput grew to 1.54 million TEUs

from 1.53 million TEUs in 2009-10 and the state-run JNPT facility handled 8,80,000 TEUs (7,80,000 TEUs).

The growth was driven by surging foreign trade. Between April and February 2010-11, exports soared 31.4 per cent year-on-year to $208.2 billion, surpassing the target of $200 billion set for the whole year. Meanwhile, the Commerce Ministry has announced plans to boost foreign trade to $450 billion by the 2013-14 fiscal. But the performance of JNPT was important for more than one reason. First, the strained industrial relations at one of the terminals of the port threw up a host of problems. In addition to suspension of work, there was congestion, diversion of ships to less congested ports, cancellation of orders, late deliveries and disruption in rail movement, to name a few. The situation has improved since then, but the backlog remains.

NEW MANGALORE PORT RECEIVES THREE CRUISE VESSELS WITH OVER 1,700 PASSENGERS The current financial year has attracted more than 1,000 cruise passengers from various parts of the world to the New Mangalore Port and its surrounding areas. In the first two weeks of the current financial year, the New Mangalore Port handled three cruise vessels. The first cruise vessel of the current fiscal, MV Albatros, with 573 German tourists called at the port on April 6. This was followed by MV Sea Bourn Pride with 176 European tourists on April 10.

On April 13, the luxury cruise vessel MV Aida Aura called at the port with 965 German tourists on board. S Gopalakrishna, Traffic Manager, New Mangalore Port Trust (NMPT), said that of the 1,714 passengers called at the port in these three vessels, around 1,100 passengers opted for ground tour. They visited places such as Thousand-pillar Jain Basadi, Soans Farm in Moodbidri near Mangalore, Gokarnanatha Temple, St Aloysius Chapel and Kadri Manjunatha Temple in Mangalore, he said.

For MV Albatros, New Mangalore was the first port of call in the country. He said that the vessel came directly from Colombo to New Mangalore. As many as 76 passengers from this vessel disembarked at the New Mangalore Port, and took a flight to Delhi. However, they embarked the same vessel at Mumbai, he said.

BHARATI SHIPYARD BETS BIG ON OFFSHORE, DEFENCE SEGMENTS Bharati Shipyard plans to focus strongly on the offshore and defence segments and expects over `2,000 crore of orders over the next one year. “The offshore and defence segments hold immense potential. We are betting big on both and expect huge orders from them in the course of the next one year,” said PC Kapoor, MD, Bharati Shipyard.

Both are presently growing exponentially and the company expects orders of around `2,000 crore from them, he said. Even now, the company’s order book of `5,000 crore has a huge component of off-shore orders at around `3,000-crore and defence orders of around `500 crore. “Oil prices have risen of late and several oil companies are presently looking to add new assets. They want to dispose of their old assets and buy new ones on account of safety concerns,” Kapoor said.

Similarly, over the next two years, there would be a huge demand for defence vessels, he said, adding that Bharati Shipyard is well-positioned to exploit these opportunities. Presently, around 50 ships are under construction at its shipyards due for deliveries by mid-2013, he said. Asked if the company was facing any problem in the bulk and container segments, he said both the segments are yet to come out of recession and one or two clients have asked the company to go slow on deliveries.

JAPAN TO BEGIN RADIATION CHECKS ON SHIPS AT PORTS NEAR TOKYO Nuclear radiation checks will be carried out on vessels leaving the Ports of Keihin by the end of April. The three ports of Tokyo, Yokohama and Kawasaki will issue safety certificates to containers and ships showing standard levels of radiation. Kinya Ichimura, the Transport Ministry’s Security and Emergency Management official, said that the ports of Keihin district, which account for 40 per cent of Japan’s foreign trade containers, will be first to have radiation checks with more to follow if testing of waters proves harmful.

Since the earthquake and tsunami of

March 11, in the north eastern part of the country, which destroyed the Fukushima nuclear plant, causing radiation leaks, up to 27 foreign containership voyages were cancelled. Japan’s 6,350-TEU MOL presence became the first vessel to be turned away since the nuclear reactor disaster by the port of Xiamen who claimed it showed high levels of radiation.

It was re-tested in Kobe and returned a month later to berth in Hong Kong after passing safety inspections. The 8,160-TEU Carsten Maersk out of Japan was since docked after inspections at Felixstowe

and Rotterdam. The move by the ministry to draw up official safety certificates after checks is supported by the Japanese Shipowners Association. It is hoped these measures will dispel concerns. “We want to see the radiation levels of ships and containers actually measured as soon as possible,” the association said.

S-E CENTRAL RLY HANDLES 140 MT TRAFFIC IN 2010-2011

MAY 2011 • SMART LOGISTICS • 9

NEWS, VIEWS & ANALYSIS L A T E S T

H A P P E N I N G S

I N

T H E

W O R L D

O F

ESSAR PORTS LOOKING AT TAPPING THIRD PARTY CARGO Essar Ports, the captive port facility of the Ruias-controlled Group, is looking at tapping merchant (third party) cargo to ramp up its volume. Essar Ports, which is being spun off as a separate entity from Essar Shipping, Ports and Logistics, is expected to be listed on stock exchanges shortly.

Currently, Essar Ports with an annual capacity of 76 MT, handles 40 MT of captive cargo, mainly crude for the Group’s Vadinar refinery and iron ore for its Hazira steel plant.

“Essar Ports, the country’s second largest in the private sector in terms of cargo volume, is on its way to double its capacity to 158 MT in the next two years.

The actual cargo volume handled by then is expected to go up to 120 MT,” said Rajiv Agarwal, CEO, Essar Shipping, Port and Logistics.

“As of now, our ports handle almost

100 per cent captive cargo. This would change in the next two years with the capacity expansion. The cargo mix would also change with the port handling more dry bulk. We expect the volume of third party cargo to go up with the capacity expansion and reach round 30 per cent by 2013,” Agarwal added. Besides capacity expansion at Hazira and Vadinar, the group is setting up a 20 MT dry bulk terminal at Salaya in Gujarat, and 30 MT iron ore and coal berths at Paradip in Orissa.

While Salaiya is expected to be ready by March 2013, Paradip terminals are scheduled for commissioning in the second half of the same year. “We expect a three-fold increase in volume in the next two years,” said Agarwal. Currently, both Vadinar and Hazira ports operate under long-term contracts with group companies at tariff, which are on par with other ports in the country.

SMM (SHIPBUILDING, MACHINERY AND MACHINE TECHNOLOGY) INDIA 2011 ORGANISED A recent research study by Export-Import Bank of India shows that despite recessionary conditions, traffic handled at major ports in India grew on an average by 5.7 per cent in 2009-10, over 2008-09. The study assesses that the Indian shipbuilding industry has the potential to grow at a rate of more than 30 per cent, and this rate could be achieved through supportive measures by the Government, including incentives for shipyards and other technological development initiatives.

With an intent to discuss the various measures that need to be taken to leverage this growth, Inter Ads Exhibitions with Hamburg Messe und Congress GmbH (HMC) organised the second edition of SMM (Ship-building, Machinery and Machine Technology) India 2011, an international platform for leading-edge maritime technologies and innovations, bringing together key decision-makers and stakeholders from the sector.

K Mohandas, Secretary, Ministry of Shipping, Government of India, said, “India has withstood global economic slowdown and is confident of the progress in the maritime sector. The government is looking at crafting policies that will help this process. The maritime agenda 2020 is poised to escalate the growth rate of the sector four times of the current ratio.” Highlighting the role of the exhibition, Dr Satish B Agnihotri, Director – General Shipping, Ministry of Shipping, Government of India averred, “Platforms like SMM India provide ample opportunities for interaction between various stakeholders and sharing of knowledge to meet market challenges and make full use of the benefits and opportunities offered by the Indian shipbuilding industry.”

TCI FREIGHT COMMENCES BANGALORE-GUWAHATI RAIL CARGO TCI Freight, the surface transport division of Transport Corporation of India (TCI), has initiated a rail cargo express service from Bangalore to Guwahati. The service will run a weekly cargo train and cover various states like Karnataka, Kerala, Assam. The first and last mile delivery of the cargo will be undertaken by a fleet through road by TCI.This is a multimodal

10 • SMART LOGISTICS • MAY 2011

service, which includes the best of road and rail logistics for a seamless, safe and reliable service. The average transit time is now reduced by 4-6 days as compared to the previous12 days by road. TCI has taken a cargo express train on lease for three years with a capacity of 20 parcel vans and 1 SLR and an carry weight up to 468 tonne.

L O G I S T I C S

KOCHI PORT LAUNCHES SINGLE-WINDOW FACILITY A single-window facility for the customers established by the Cochin Port Trust was formally inaugurated by Paul Antony, Chairman, Port Trust. The facility will cater to the documentation of all cargorelated activities at Mattancherry Wharf, Ernakulam Wharf and oil tanker berths under the port trust.

The facility will act as a one-stop service window for entry/exit and billing for the pre-stage facility and clearance for export and import containers. The facility will also provide billing service for the storage of containers and reefer service.

Daily wharf entry pass for the customers and crew of the cargo vehicles will also be issued from the facility. The facility will function on all days from 0600 hours to 2200 hours. AA Abdul Azeez, President, Cochin Custom House Agents Association, welcomed the commencement of the service. The facility has online connectivity to the Customs and port systems and facilitates real-time billing and document generation.

D Anilkumar, Assistant Traffic Manager, will be in charge of the facility.

CONCOR ANNUAL PROFIT JUMPS 5.5 PER CENT INDIA, CHINA TO HELP BUILD ETHIOPIA RAIL NETWORK India and China are jointly assisting in constructing a national railway network to improve the transport system in Ethiopia.

India has pledged $300 million for the rail network project as part of its assistance to the infrastructure development of African countries. The Export & Import (EXIM) Bank of China will fund 85 per cent of the cost of a light rail network in Addis Ababa at $490 million. The cost of the rail network across the country has been estimated at $6 billion and is part of the Ethiopia’s Growth & Transformation Plan, which has set a goal of construction of a 2,395-km national rail track. Each kilometre of the national track is estimated to cost $2-3 million and based on this calculation, the average cost for the 1,808-km network works out to around $4.5 billion.

Gain an analytical insight into the intricate Legalities Involved In Logistics, this June’11

Also featuring: Special Focus: Rail freight Sector Analysis: Automotives Be a part of this special issue and reach out to the entire value chain of the logistics industry.

Call : 022 3003 4651 OR write to us at b2b@infomedia18.in

NEWS, VIEWS & ANALYSIS L A T E S T

H A P P E N I N G S

MAHINDRA LOGISTICS TURNOVER CROSSES `1,000 CRORE GOVT TO INVEST `1 LAKH CR IN 13 MAJOR PORTS The government is looking at an investment of over `1 lakh crore in 13 major ports, majority of which will come from the private sector, to expand their capacity by 767.15 million tonne (MT) in the next 10 years. “We have identified 352 projects for major ports to increase their capacity by 767 MT. This will entail a `1.09 lakh crore investment of which `72,878 crore has been estimated to come from the private sector,” said a Shipping Ministry official. The major ports capacity was recorded at 616.73 MT on March 31, 2010. The balance `36,571 crore would be funded through internal resources and the budgetary support, he said.

The proposed investment is in addition to 72 ongoing projects with a total cost of `18,493 crore to generate a capacity of 143 MT. India, at present, has 13 major ports – Mumbai, Jawaharlal Nehru Port Trust, Kolkata (with Haldia), Chennai, Visakhapatnam, Cochin, Paradip, New Mangalore, Marmagao, Ennore, Tuticorin, Kandla and Port Blair under the Centre’s control. The development projects have been identified for deepening of channels, construction and re-construction of berths, procurement and modernisation of equipment, hinterland connectivity, etc. to be undertaken in three phases.

The first phase will end by 2012, the terminal year of the current 11th Five Year Plan, while the second phase will be implemented during the 12th Five Year Plan (2012-17) and the final phase will end by 2020.

The government recently unveiled a new policy for the shipping sector that entails an investment of `5 lakh crore by 2020 to take the ports capacity to 3,200 MT and bring in major reforms in the space. Earlier, this year, the government unveiled a new maritime agenda to take the port’s capacity to 3,200 MT from 617 MT on March 31, 2010.

12 • SMART LOGISTICS • MAY 2011

I N

T H E

W O R L D

O F

L O G I S T I C S

PORT TARIFF GUIDELINES TO STAY FOR ONE MORE YEAR, SAYS MINISTRY There will be no change in the norms to fix tariffs of terminals in major ports. The Shipping Ministry has decided to extend the 2005 port tariff guidelines by one more year. These guidelines, which were extended by a year on April 1, 2010, lapsed on March 31, 2011. The move will impact the terminal operators such as PSA Terminals, DP World and GTI, who had entered into concession agreements with port trusts before 2008. The Shipping Ministry came with upfront tariff-setting guidelines in 2008.

It had set up a committee to suggest changes in the guidelines.

“We have decided to extend the 2005 tariff guidelines by one more year. We will take a view after the committee submits its final recommendations,” said K Mohandas, Secretary, Shipping Ministry. Port terminal operators had sought a review of some clauses of the 2005 tariff fixing guidelines of Tariff Authority of Major Ports (TAMP).

For instance, a clause specifies how tariffs will change in case actual traffic handled in a terminal is different from the initial projections. In case, a terminal handles more traffic than initial projections, then the next round of tariffs will be revised downwards, says the clause.

The industry lobby body, Indian Private Ports and Terminals Association (IPPTA), had taken up this issue with the ministry, saying that its guideline penalises the efficiency of terminal operators. However, changing this clause could imply increasing the revenue of terminal operators. This makes the committee officials wary of suggesting any deviation. Terminals that came up before 2008 could face the brunt of this clause whenever their tariffs are reviewed next.

GEORGIA PORT VOLUME GROWS AS RO-RO SURGES

MORMUGAO PORT CARGO TRAFFIC CROSSES 50 MT

The volume of containers handled by the Port of Savannah increased 4.5 per cent in March from the same month last year, at the same time as the number of rollon, roll-off units passing through the Port of Brunswick surged 36 per cent to a new monthly record.

Savannah handled 2,38,030 TEUs in March as compared to 227,860 TEUs in March 2010. The volume to date for the 2011 fiscal year ending June 30 is 12.6 per cent higher than for the same period in fiscal year 2010.

The Port of Brunswick posted its best month ever in March for automobile and machinery units or Ro-Ro Cargo at Colonel’s Island Terminal, which handled a total of 42,740 units. “We attribute the Port of Brunswick’s volume gains to a number of factors including economic recovery, a renewed consumer market for automobiles and the expanded vehicle processing center facilities,” said Curtis J Foltz, Executive Director, Georgia Ports Authority.

Ro-Ro volume at Colonel’s Island Terminal posted a 51.7 fiscal year-to-date increase for fiscal 2011 as compared with fiscal year 2010. The growing automobile volume reflects market share gains by the primary brands the GPA handles, specifically Hyundai, Mercedes, BMW, Kia and Volkswagen.

The Mormugao Port Trust (MPT) has announced that it has crossed the 50 MT cargo throughput during 2010-11. The figure has touched 50.02 MT as against 48.85 MT handled last year.

The port has secured the 7th position among the 12 major ports of India surpassing the 50 million tonne target set by the Ministry of Shipping, said P Mara Pandiyan, Chairman, MPT. “Of the total throughput, exports accounted for 40.84 MT, while imports 9.18 million tonne, registering an increase of 16 per cent, an all-time record,” said Pandiyan.

Giving a break-up, the Chairman said that iron ore constituted 40.35 MT, coal/ coke 6.93 MT, besides 1.5 MT of POL and other liquid cargo. Pandiyan added that 10.63 MT were loaded by the Mechanical Ore Handling Plant (MOHP) at berth No. 9 as against 12.01 MT loaded in 2009-10.

The fall was mainly due to the extended monsoon and ban on iron exports from Karnataka.

The port witnessed a slight drop in the container traffic, which was 17,602 TEUs during the year under review as compared to 17,296 TEUs handled in 2009-10. In all, the port handled 948 cargo vessels (985).

Cruise traffic has also risen with 21 vessels calling at the port with 9,371 passengers as against 19 vessels during the previous year.

NEWS, VIEWS & ANALYSIS L A T E S T

H A P P E N I N G S

I N

T H E

W O R L D

O F

WARBURG INVESTS $100M IN A CHENNAI-BASED LOGISTICS FIRM Private equity giant, Warburg Pincus India, is investing $100 million in Chennai-based logistics firm, Continental Warehousing Corporation (Nhava Sheva), a flagship company of the NDR Group.

Existing investors such as Aureos India Fund and ePlanet Ventures, who entered the company in 2009, are set to part exit in the transaction. Neither Warburg nor the company revealed the extent of stake bought by the former, but informed that it was a minority stake. The NDR Group will utilise this investment to fund its expansion plans and build its position as an end-to-end logistics solutions provider, stated a group release.

Since its inception in 1954, NDR Group has evolved into a diversified logistics company, with activities spanning container freight stations, inland container depots, port operations, warehousing, third party logistics, transportation and

express cargo. The company would merge all the operations into one company, with Continental Warehousing being the capstone company, said sources.

NDR Group handles container and bulk cargo, and provides contract logistics services to a blue chip customer base across 50 locations, comprising over 10 million sqft of storage space in India.

Continental Warehousing had raised $16 million from Aureos India Fund and ePlanet Ventures in 2009. Both the firms would be part exiting the company in the deal. “This is our fourth big investment in the last one year. With the infrastructure bottlenecks, logistics is one sector, which is set for rapid growth in India,” said Vishal Mahadevia, MD, Warburg Pincus India. The three other investments include $85 million in Metropolis Healthcare, $65 million in Quest Global and $50 million in IMC.

GLOBALLY NETWORKED CUSTOMS MOOTED TO STOP ILLICIT FUND MOVEMENT THROUGH EXPORT INVOICING ROUTE In order to prevent the movement of illicit funds through wrong invoicing of exports, India, the US, Belgium and South Africa have pitched for globally networked Customs departments. The idea came about due to the growing awareness that global trade mispricing is now the single biggest means of moving unaccounted money across national borders. S Dutt Majumdar, Chairman, Central Board of Excise and Customs (CBEC), asserts that a globally networked Customs could help both, in trade facilitation and enforcement. According to a Finance Ministry official, such a system could help prevent the loss of revenue to countries and check money laundering by expeditious interchange of crucial data. “A detailed policy paper is expected to be taken up at a crucial meeting of the World Customs Organisation in June,” he said.

According to a report by the Global Financial Integrity, trade mispricing accounted for an average 54.7 per cent of cumulative illicit flows from developing countries between 2000 and 2008. “Developing country treasuries lose close to $100 billion each year due to trade mispricing,” the report claimed. The global network of Customs authorities will clear the way for exchange of information on valuation of goods, rules of origin and intellectual property rights. For example, if authorities come across an importer who has declared value of goods lower than the price in the source country, they can promptly initiate action to prevent revenue loss or probe into the reasons for such declaration. Experts believe that such a system could help create a risk-based model and facilitate trade.

L O G I S T I C S

WESTERN INDIA SHIPYARD BAGS `60 CRORE ORDER FROM ABAN OFFSHORE GLOBAL CONTAINER THROUGHPUT BOUNCES BACK TO RECORD HIGH IN 2010 The volume of containerised traffic globally saw a strong rebound in 2010, at an estimated 560 million TEUs. This was up by an all-time high of 14.5 per cent year-on-year after experiencing a 8.9 per cent decline in 2009. Last year’s recovery was mostly attributed to the growing volume through Chinese ports, reported maritime analyst Alphaliner.

Total container volumes handled in China, including Hong Kong, grew by 17.9 per cent to 169 million TEUs. China has nine of the world’s top 20 box ports which are growing faster than similar facilities elsewhere.

South America is the second-fastest growing container volume region with increase in throughput by 17.6 per cent in 2010. Among the top 50 ports worldwide, the average growth in container volume was 15 per cent to 363 million TEUs in 2010 compared to 316 million TEUs in 2009.

Only three ports recorded a loss.

Hong Kong’s Hutchison Port Holdings (HPH) regained its global lead with total volumes increasing by 14.9 per cent to 75 million TEUs in 2010. The runner-up was Hague-based APM Terminals with a growth of two per cent to an estimated 70 million TEUs. China Merchants Holdings International (CMHI) posted the highest growth of 19.2 per cent year-on-year with total volume of 52.3 million TEUs in 2010.

CABINET PANEL APPROVES TWO HIGHWAY PROJECTS The Cabinet Committee on Infrastructure approved the development of six lanes on NH-8 between Ahmedabad and Vadodara and four-lanes on NH-12 between Kota and Teendhar in Rajasthan.

According to a statement, the six lanes spanning 102.3 km between Ahmedabad and Vadodara under the NHDP Phase

V will be done on the Design, Build, Finance, Operate and Transfer (DBFOT) basis in BOT (toll) mode of delivery. The project cost is estimated at `2,537.76 crore and the concession period is 25 years, including the construction period of 36 months.

The project will cover the districts of Ahmedabad, Kheda, Anand and Vadodara

in Gujarat. The four lanes spanning 88.09 km between Kota and Teendhar is being done under the NHDP Phase III phase on DBFOT basis in BOT mode of delivery.

The total project cost is estimated at `580.79 crore under the DBFOT pattern.

The concession period is 25 years, including the construction period of 30 months.

MAY 2011 • SMART LOGISTICS • 13

NEWS, VIEWS & ANALYSIS L A T E S T

H A P P E N I N G S

I N

T H E

W O R L D

O F

L O G I S T I C S

OUTSOURCING OPERATIONS PUT PORT AT RISK Chennai Port officials say that outsourcing harbour pilot operations may pose a risk, affecting ship and port safety. When a merchant ship approaches a port, it waits for a harbour pilot and the team on tug boats to board the ship and manoeuver it into the docks. Ship crew are unfamiliar with port details and the pilots are crucial to the port operations of a ship. One small mistake on the part of the pilot or his team could lead to catastrophic collisions with other ships or with port structures. While manoeuvring into Chennai may be easier than for example the Vizag Port, Chennai Port officials are still apprehensive that critical operations, which affect the safety and security of a port should not be outsourced. Port officials say that there is a shortage of experienced pilots and tug boat teams and outsourcers may cut corners by hiring inexperienced hands. They recommend a system that ensures permanent harbour pilots.

Many Indian pilots have moved to foreign ports attracted by higher salaries.

Harbour pilots in India get a salary of `30,000 – `60,000 per month, while foreign ports pay at least 10 times more. A senior port official who works in the traffic department said that the shortage of pilots is a problem with all the Indian ports and authorities are trying to

RAILWAYS ADDS 16,638 WAGONS IN FY11, THE HIGHEST EVER

maintain the operations with the available workforce.

A harbour pilot with Chennai Port said that the Ministry of Shipping and Marine Departments have no means to attract experienced hands into this profession.

He also suggestsed that ports should compensate mariners at the market rate and people with maritime backgrounds should be promoted to key posts to ensure navigational safety.

GM Krishnamurthy, General Secretary, Madras Port Trust Employees Union, said that the job contract system and outsourcing of core operations to private agencies compromise with port safety.

“The port, which is a commercial entity, should have its own manpower and equipment to run the core operations,” he said. Krishnamurthy added that the port authority is not concerned about retaining experienced hands and is losing them by maintaining a contract system.

“Sometimes, private agencies would use inexperienced hands to handle incoming and outgoing vessels and tug operations. This increases the chances for major accidents,” said a senior port official.

The assistance of a pilot is necessary for a ship to claim insurance coverage if the accident happened within the water limits of the port.

A senior official with Mercantile Marine Department said that the ministry is yet to address the issue of harbour pilots.

“As the government does not want to take any more liabilities, it prefers an outsourced mode of operations in all the ports, even in availing manpower.

JNPT HANDLES ALL-TIME HIGH 64.30 M TONNE, 4.27 MILLION TEUs Jawaharlal Nehru Port Trust (JNPT) has once again crossed new milestones during a fiscal, handling its highest-ever overall throughput of 64.30 million tonne in 2010-11, including an all-time best 4.27 million TEUs. The previous highest corresponding figures were 60.76 million tonne and 4.06 million TEUs, respectively, in 2009-10. The liquid cargo handled too was the best ever, at 6.789 million tonne, surpassing the previous highest 6.627 million tonne in 2009-10.

These performance highlights were recently announced by L Radhakrishnan, Chairman, JNPT. It was also graced by NN Kumar, IRS, Deputy Chairman, SK Kaul, Chief Manager (Administration) and Secretary, other senior officers of the port and the private terminals, representatives of trade, etc. The 57.5 million tonne of solid cargo handled was the highest among the country’s ports, while containerised cargo (56.43 million tonne) and liquid cargo (6.79 million tonne) grew at 5.13 per cent and 10.56 per cent, respectively. Of the 4.27 million TEUs, JNPT moved 0.88 million TEUs, NSICT 1.54 million TEUs and GTICT 1.85 million TEUs. The year-on-year increase was 12.9 per cent for JNPT, 0.34 per cent for NSICT and 5.88 per cent for GTICT. JNPT retains its majority share in container handling among the country’s ports, at 56.66 per cent.

PHILIPPINES PORT OPERATOR TO RUN KATTUPALLI TERMINAL Philippines Port Operator, International Container Terminal Services Inc (ICTSI), will open a new container terminal by January 2012 at Kattupalli near Ennore in Tamil Nadu, where Larsen & Toubro (L&T) is building a shipyard at a cost of `3,375 crore.

ICTSI and L&T Shipbuilding have signed a container port operation agreement for the management and operations of the Kattupalli container terminal in Tamil Nadu, said K Venkatesh, Senior Vice President, L&T. L&T shipbuilding is a venture between L&T with a 97 per cent stake and Tamil Nadu Industrial Development Corporation holding the

14 • SMART LOGISTICS • MAY 2011

remaining equity. Kattupalli terminal is ICTSI’s first venture in India.

The terminal will have two 350-m berths and a terminal area of around 20 hectare with a capacity to load 1.2 million standard containers in its first phase of development. Venkatesh believes, in the second phase, its capacity can be increased to handle 1.8 million standard containers Manila-based ICTSI is a port manager involved in operations and the development of 23 marine terminals and port projects in 17 countries. L&T, India’s biggest engineering and construction firm, adopted the operation and maintenance

model in selecting ICTSI to run the container terminal at Kattupalli.

By setting up a container-handling facility at Kattupalli, L&T is eyeing a potential traffic of 2.5-3 million standard containers a year in the vicinity of Chennai as well as from the proposed Ennore Special Economic Zone adjacent to the site.

Container cargo loaded at the 12 Union Government-owned ports in Asia’s third-biggest economy grew at an average of 16 per cent a year between 2004 and 2009. The Kattupalli facility will intensify competition for loading containers in and around Chennai.

SKILL ENHANCEMENT NEWS ANALYSIS

TRAINING TRUCKERS OF TOMORROW The logistics industry has not paid sufficient attention to hone the skills of its workforce. This has resulted in the absence of an institutionalised skill development environment, which has left a poor image in the minds of new recruits. But the picture is not all that grim. With the opening up of skill development institutes recently, it seems that the industry has begun to realise the imperatives of a robust institutional framework for the overall growth of the industry.

SANDEEP PAI TO ease the problem of shortage of trained personnel in the domestic transport industry, the Hyderabad Goods Transporters Association (HGTA) inaugurated a modern transport training school. The institute, dedicated to train

personnel of the transport sector, including truck drivers, cleaners, transport labours and other staff, is the first of its kind.

Pawan Kumar Gupta, President, HGTA, says, “The centre, which has been set up at a cost of `2 crore can accommodate

300 students every month.”

The centre will instill better driving practices and improved fuel efficiency, basic mechanics and safe practices, apart from other aspects of ‘life on the road’ such as troubleshooting, fire-fighting

MAY 2011 • SMART LOGISTICS • 15

Skill enhancement, continued

and first-aid. It will offer both, technical and soft skills programmes. “There are four programmes offered as vocational certificate courses. These are six months full-time programmes, including three months of practical training,” says Gupta.

Some additional optional subjects, such as basic computer course, meditation & yoga (to enable drivers relax after hours of driving) and life skill development, will also be a part of the curriculum.

In yet another initiative, Ashok Leyland also announced that they will set up a driver training institute in Chhindwara, Madhya Pradesh. This will be the third facility for Ashok Leyland, with the vehicle manufacturer already having two driver training institutes, one in Tamil Nadu and other near New Delhi.

Such initiatives are welcomed by the industry as the need gaps are alarming.

Moreover, several leading logistics companies like TCI, GATI, etc., have also started imparting training courses for their staff. These initiatives may seem like a small step, but they are significant because the country lacks skilled drivers and other transport industry-related staff. Ironically, despite being a much talked about issue, logistics players, have recently taken initiatives to tackle the crisis being faced by the logistics industry.

THE NEED GAPS A KPMG India report on ‘Skill gaps in Indian logistics’ looks at the finances of a set of 80 logistics companies in India across sectors. It reveals that manpower expenditure includes 8-10 per cent of overall sales of the sector. This roughly translates to an annual spend of about `500 billion on logistics manpower in the country. Only about 13 to 14 per cent of the overall manpower costs are spent on non-salary, manpower development items (welfare, training, etc). The share for unorganised companies would expectedly be much less. As against this, leading global logistics companies spend around 20 per cent of their employee expenditure on non-salary items.

The report says, “This lack of focus on developing manpower and skills for the logistics sector has resulted in a significant gap in the numbers and quality of manpower in the sector. This gap, unless addressed urgently, is likely to pose a key impediment for the growth of the logistics sector in India, and could consequently impact the growth in industry and

16 • SMART LOGISTICS • MAY 2011

manufacturing sectors as well.” This underscores the need for identifying areas where such manpower & skill gaps are critical and developing focussed action plans to improve the situation.

IMPEDIMENTS ENCOUNTERED The two major problems plaguing the logistics industry are lack of skills among the existing staff and the shortage of people in this sector. If current estimates are anything to go by, India boasts of 32 lakh truck drivers, of which only two lakh are trained by everybody put together.

The remaining 25 lakh drivers operate trucks without any training. Furthermore, the current numbers are likely to swell to nearly five million by 2015. Even if 50 per cent of all drivers in India were to be trained, several such institutes have to come up in various parts of the country.

Truck drivers in India constitute the profile with the most critical skill gaps in the road freight segment. The profession attracts largely illiterate people having no formal training on the job. Roads have more than 70 per cent share of the goods & freight traffic in India and human error is responsible for 57 per cent of all road accidents in India.

Yet, the condition of road drivers is pathetic. They do not have decent places to rest or perform their ablutions.

Apart from the long wait during loading and unloading, they have to queue up at checkpoints for long hours and are frequently stopped by RTOs and police.

Explaining this problem, Sunil B Kale, General Secretary, Bombay Goods Transport Association (BGTA) says, “There is a huge shortage of skilled drivers in our industry. Previously, people used to start working as a cleaner and eventually learn the basics of driving a truck. It was only after a period of 5 to 10 years that they would become full-fledged drivers.

However now, as the industry is growing, this process of employing drivers is getting even more impractical.”

Besides, new models of commercial vehicles hitting the roads, the need for a new generation of skilled drivers have increased all the more. While the training of existing drivers is a priority, attracting fresh blood in the profession is also imperative as the logistics sector is growing massively. With a current shortage of about two lakh drivers, the transport industry is worried that the problem will escalate in the years to

come to the extent that it could slow down the growth in this sector. The shortage is aggravated by the fact that a large number of the existing drivers are close to retirement and the new generation is not eager to pursue this profession. However, Sanjay Upendram, CEO, Amarthi Consulting, says, “There are many job seekers from villages and smaller towns, but they are unaware of the availability of jobs. Thus, the lack of information is the biggest culprit.”

SOLUTIONS SUGGESTED To address the problems of skill development and to bridge the demandsupply gap, Upendram suggests streamlining of the value chain of skill development.

He says, “Training institutes should come up across the country starting with major metros and logistics hubs like Pune, Chennai, Gurgaon, etc. Alongside, proper awareness regarding the setting up of such institutes should also be generated so that interested people can join them.

Moreover, these institutes should also initiate steps towards job placements.

If direct placement is not possible, then trained personnel should be given information about where vacancies exist.

When such an environment is created, the shortage will automatically decline.”

Nonetheless, the success of this initiative would require a collaborative approach by various industry stakeholders.

ADDED EFFORTS REQUIRED Market leaders would need to push for the establishment of institutionalised training infrastructure and introduce incentives for training by mandating certification levels for recruits. The government, on their part, would need to support industry players in their initiatives and provide for a more conducive enabling environment.

Upendram says, “If our economy has to grow by 8-9 per cent, then the logistics sector has to grow by 20-30 per cent. But for this to materialise, skill development should also witness a corresponding 20-30 per cent growth. As of now, this sector is growing at a mere five per cent, which is a serious concern that needs to be immediately addressed. The level of commitment demonstrated by each stakeholder will determine which direction the sector will head towards.”

Image courtesy: Hyderabad Goods Transporters Association (HGTA)

INDIA – NETHERLANDS TRADE LINKS REPORT

LEVERAGING On Their Core COMPETENCIES Netherlands acts as a gateway for Indian products to be sourced from/to European industrial and consumer markets. Similarly, India has provided a platform to Dutch importers to showcase their products in the country. To enhance this partnership in transport and logistics, the Netherlands Consulate with Smart Logistics as its media partner, organised the ‘India and The Netherlands: Ports Combining Logistics, Creating Business’ a debate forum on April 6, 2011, in Mumbai. A report…

SUDHIR MUDDANA THE Netherlands plays a key role in Europe’s globalised economy by connecting producers and consumers worldwide. Its success is based on the alignment of cutting-edge infrastructure and world-class service providers, and its coastal location is at the heart of Europe.

Setting an exemplary benchmark are the Port of Rotterdam, Europe’s largest port by far and the world’s fourth-largest, and Amsterdam Airport Schiphol, a major European cargo & passenger hub. Both are supported by world-class logistics service providers and an extensive network of road, rail, waterways and pipelines. This powerful combination has allowed the country to become the gateway to Europe, accounting for significant parts of European road and water transport.

The Netherlands also makes extensive use of IT to deliver optimised supply chain solutions, (for e.g., in time-critical areas like food and flowers). In addition, the country is making pioneering efforts in environmentally sustainable logistics.

While the Netherlands provides the necessary platform for logistics, India too is gaining prominence among Dutch exporters. A fast growing economy, huge population and increasing income & wealth levels have led to higher industry and consumer demands for Dutch products & services.

Keeping these factors in mind, the two countries can leverage on each other to improve their logistics services. While it is seen that India’s association with the Netherlands dates back since decades, the

two countries are now trying to work more closely with each other, take advantage of what each has to offer and share their learnings.

With a vision to understand the needs of both, the Indian as well as the Netherlands logistics industry and to strengthen their association, (L-R) Enno Osinga, Sr Vice President – Cargo, Schiphol Cargo; Melanie Schultz van Haegen, Minister of the Netherlands Infrastructure and Environment, the Netherlands; Radharamanan Panicker, CEO, Cargo Service Centre Consulate with India sharing the stage during the summit.

Smart Logistics as they can offer each other as well as ways its media partner, organised the ‘India they could implement while working with and The Netherlands: Ports Combining Logistics, Creating Business’ Mumbai forum each other. Elaborating on the advantages debate on April 6, 2011, in Mumbai. of doing business with Netherlands, The event provided a platform for Kees Gerretse, Director – Global maritime professionals from both the Procurement, Tata Steel, says, “The Netherlands has the best infrastructure countries to come forward and discuss their problems, the help and support and the lowest logistics cost in Europe.

Considering the stage at which we are today, we need to be more of a facilitator than a controller.

Most government authorities think that they only need to control. And perhaps, the intentions at the policy makers’ level are very decent, but when it comes to the working level, the reality is quite different. So, it is very important to be in the role of a facilitator.

MUKESH OZA, GROUP PRESIDENT & CEO, SAMARA GROUP

MAY 2011 • SMART LOGISTICS • 17

India – Netherlands trade links, continued

This is one of its main advantages and an important reason why doing business in the Netherlands is good.”

DUTCH CUSTOMS FACILITATING TRADE Customs play a vital role in facilitating a smooth and seamless supply chain in the country. The Netherlands has managed to make its Customs conducive towards facilitating logistics, while still being strict and making sure that the rules are properly enforced. Bert Wiersema, Regional Director, Customs Administration of the Netherlands (Regional Office Rotterdam Port), explains, “We have to strike a balance between the enforcement of Customs rules and facilitating logistics. While we constantly try to move on and do better, we have to make sure that the work is done faster and with fewer resources. The Dutch Customs has evolved from being a gatekeeper to being a team player in the world of logistics.” Adding further, he says, they follow e-customs, wherein most of their declarations and processing is done through the use of technology with less human intervention. In other words, they use more technologies such as gammaneutral detection systems and X-ray inspections while checking goods.

This came across as a major learning for the Indian counterparts as they can work around the policies to ensure that rules support the growth of logistics in the country. Talking about the improvements and advancements done by the Indian Customs, KR Bhargava, Chief Commissioner of Customs, JNPT, says, “The Customs is a critical component in the supply chain and the efficiency in Customs affects the trade.

Today, India is no more a closed economy and the Indian Customs have upgraded their processes and technologies to

The main problem faced by Indian companies is that they are not able to perform dredging. We need European partners to help us with dredging, and change the way it is performed in India today.

TUSHAR JANI, CHAIRMAN, SCA GROUP OF COMPANIES reduce the collection costs to help the trade move goods faster. I am proud to say that we have our EDI system, which is integrated with ports, banks, etc. We also allow traders to pay Custom Duty online using e-payment. In addition, we have a risk management system in place and our processes of remuneration and assessment is also based on risk rules. So, we are moving in a direction similar to the Customs of other governments.”

OVERCOMING THE CHALLENGES Although the Indian Customs is now trying to do its bit to facilitate the growth of trade and logistics movement in and out of the country, it still needs to tackle certain challenges. Mukesh Oza, Group President & CEO, Samara Group, explains, “Considering the stage at which we are today, we need to be more of a facilitator than a controller.

Most government authorities think that they only need to control. And perhaps, the intentions at the policy makers’ level are very decent, but when it comes to the working level, the reality is quite different. So, it is very important to be in the role of a facilitator.” He adds, “We operate ships, private railways, etc. and the time wasted in convincing people and authorities, if invested in doing business instead, perhaps our business would have grown at least by 30 per cent. Secondly, a lot of investment has been made by certain government corporations and companies like Concor and this investment is only helping one operator, while others

We have to strike a balance between the enforcement of Customs rules and facilitating logistics. While we constantly try to move on and do better, we have to make sure that the work is done faster and with fewer resources. The Dutch Customs has evolved from being a gatekeeper to being a team player in the world of logistics.

BERT WIERSEMA, REGIONAL DIRECTOR, CUSTOMS ADMINISTRATION OF THE NETHERLANDS (REGIONAL OFFICE ROTTERDAM PORT)

18 • SMART LOGISTICS • MAY 2011

keep re-inventing the wheel. This means that the investment that is being made by the government is not being utilised to the fullest, which results in delays in transportation, delays at ports, etc.”

Tushar Jani, Chairman, SCA Group of Companies, further adds that the main problem faced by Indian companies is that they are not able to perform dredging.

Calling for European partnership, he says, “We need European partners to help us with dredging, and change the way dredging is performed in India today.” The advantage India has is that it can adopt the latest technologies. That is the chance that India has – to adopt the world’s latest and best technologies and practices.

STRENGTHENING TIES The discussions at the event clearly proved that there is a need for companies and corporations to work with the policy makers and develop a model, which will help bring in more business for the country. In addition, while the Indian logistics fraternity should look and adopt different IT initiatives, companies from the Netherlands could contribute in terms of training the Indian workforce.

Concluding the event, Dutch Minister of Infrastructure and Environment, Melanie Schultz van Haegen, says, “Trade and transport are important for the growth of an economy. They have been the main drivers for growth in the Netherlands since the late 16th century.

Clearly, as trading nations, India and the Netherlands, have common grounds for the business community of each country.

We can intensify our relationship, logistics, fiscal contracts, customs, IT, traffic management, port management and dredging for the benefit of both the countries.”

“As logistics partners, we can make our connections stronger. Acting together, we can be partners in progress, and that is why the Government of Netherlands has pursued sustained efforts to improve relations with India and its logistics industry,” she concluded.

INDIA SUPPLY CHAIN COST OPTIMISATION SUMMIT REPORT

SCM FINDS A FOOT THROUGH BOARDROOM DOORS Amid increasing competition and changing market dynamics it has become imperative for companies to gain a competitive edge by building a robust supply chain management system that helps in attaining cost optimisation. Considering this emergent need, Supply Chain Leadership Council with Smart Logistics as its media partner recently organised ‘India Supply Chain Cost Optimisation Summit’ which highlighted the importance of cost optimisation and discussed case studies and strategies on supply chain management. A report…

PURNA PARMAR AS the resilience of Indian economy accelerates revival in consumption and trade, discussions in the board rooms are revolving towards supply chain and its power to create service differentiation, its impact on revenue and cost. There is heightened awareness of the fact that high volume businesses including consumer goods, modern retail formats, auto ancillaries and telecom have limited headroom on the revenue side, making consistent cost optimisation focus a necessity. At 13 per cent of the overall cost, the supply chain component costs are much higher in India as compared to most parts of the world. But therein lies the opportunity. Keeping this in mind, Supply Chain Leadership Council with Smart Logistics as the media partner organised the 2nd edition of ‘India Supply Chain Cost Optimisation Summit’ on April 21, 2011 in Mumbai to discuss cost optimisation strategies and tactical successes within supply chain management in the Indian environment.

SCM IN INDIA’S BOARD ROOMS For decades, supply chain has been viewed by top management as a cost that needs to be consistently driven down, reducing the wide concept of supply chain management to the minimum cost per km/ per square feet. However, as business becomes global and more competitive, supply chain management has found its place on board agendas as an essential ingredient of the overall strategy. And the mood is now slowly shifting from being a cost reduction tactic to a cost optimisation strategy. Dr Rakesh Sinha, COO, Godrej Consumer Products, while

Voicing thoughts for a cause: Delegates in the panel discussion included (L-R) Vivek Karwanyun, GM – Supply Chain, Dalda (Bunge); Shammi Dua, Head – Logistics & Customer Operations, Akzo Nobel; R Ravichandran, Head – Logistics (Electrical products) Larsen & Toubro; Sanjay Sinha, MD – Leeway Logistics; Major Shashi Tiwari, VP – BD and SCM, The Loot; Dharmendra Gangrade, GM & Head of Logistics – Pidilite Industries.

sharing his experience at the summit said that it is imperative to educate the company’s board on the significant impact of both – efficient or inefficient SCM – suggesting that the board’s attention can

be gained by demonstrating how SCM can increase revenue without increasing marketing spends or capacity, and reduce cost through lower inventories and a progressive reduction in conversion cost

Summit highlights: • Discussion on SCM in India’s board rooms – Educating top management about its revenue and cost potential • Balancing service levels with optimal supply chain cost • Technology, innovation and best practices in supply chain cost management • Cost optimisation through optimal procurement and packaging • Brainstorming on case studies on supply chain optimisation in the Indian environment.

MAY 2011 • SMART LOGISTICS • 19

India supply chain cost optimisation summit, continued

Given Nokia’s arrangement with the Tamil Nadu Government, for waiver of sales taxes has created a GST environment for them even before its implementation and this arrangement is being fully utilised in operating a direct factory-to-state level warehouse delivery model causing a 20 per cent reduction in on-hand inventory cost, 10 per cent reduction in transportation and 35 per cent reduction in warehouse cost.

SUSHIL AGARAWAL, HEAD – SUPPLY CHAIN, NOKIA INDIA over years. He also demonstrated, using a case study, how replenishment-based supply chain management has helped Godrej achieve significant gains in the market share across several products and saved costs while avoiding premature capacity expansion.

Similarly, Shashank Raodeo, GM – Automotive Logistics, Mahindra & Mahindra, credited with setting up the global supply chain for Mahindra-Renault Logan project, stressed the importance of strategic sourcing, explaining that a 5 per cent reduction in material cost may result in a 1 per cent increase in operating profit, which is equivalent to 10 per cent increase in sales, a function with limited headroom due to several external and competitive factors.

THE BALANCING ACT

and optimal supply chain.

In addition, given India’s ground realities, peculiarities and complexities, supply chain managers have been able to create and successfully draw results from India specific innovation on the supply chain front. Stressing on the importance of IT for effective supply chain management, Vikram Kole, Head – Sales, DSI Online, said, “Technology assists in capturing error points and thereby injecting accountability at all levels.” He specifically spoke of extending the technology platform to more stakeholders in the supply chain process, for instance, a truck driver through easily available mobility devices, to support greater integration and transparency.

COST OPTIMISATION THROUGH PROCUREMENT AND PACKAGING

There exists strong trade-offs between providing the highest service levels, round the clock availability that too at least cost in most of the leading supply chains. And the supply chain head knows this very well having been between the sales head and the CFO. Balancing these tradeoffs in an increasingly dynamic market environment can be challenging but truly fruitful. According to Major Shashi Tiwari, VP – BD and SCM, The Loot, poor supply chain management especially by companies retailing FMCG is supporting the development of new business models such as The Loot, which thrive on unsold inventories in the hands of global brands.

Besides the storage points, mixing primary & secondary transportation efficiently and timing the last mile well; getting

TECHNOLOGY FRONT

the procurement right are the essential ingredients of optimally managing the overall supply chain costs. The same is true for packaging. Cases built around optimal procurement, packaging strategies and innovation were also discussed as a part of the overall supply chain cost optimisation programme at the summit.

Though India has been a late adopter of technology-driven supply chain cost optimisation, the last decade has seen supply chain heads as well as logistics service providers experimenting with technology and gradually recognising its value as an integral driver of a successful

20 • SMART LOGISTICS • MAY 2011

Four experts in procurement and supply chain management across different product categories viz. Saurabh Tiwari, Lead – Strategic sourcing (Asia Pacific), Kraft Foods, Ashu Khanna, Head – Supply Chain, Marico, Susshruth Apshankar, Head – Commercial Strategy, Idea Cellular and Ashok Kumar, Director – Supply Chain, Pepsico India, shared their experiences of extracting up to 2.5 per cent more procurement value per rupee spent based on simple principles of centrally managed supplier partnerships on an effective technology platform, encouraging innovation at supplier level, coaching the process of sourcing and SCM at supplier procurement level, reducing supplier base and, in general, focussing on long-term, non-price reduction-based approach.

THE TAKE AWAY The event also had a few case studies presented by various supply chain heads. Sushil Agarawal, Head – Supply Chain, Nokia India, explained that given Nokia’s arrangement with the Tamil Nadu Government, owing to its factory location in a Chennai SEZ for waiver of sales taxes has created a GST environment for them even before its implementation and this arrangement is being fully utilised in operating a direct factory-to-state level warehouse delivery model causing a 20 per cent reduction in on-hand inventory cost, 10 per cent reduction in transportation and 35 per cent reduction in warehouse cost. The summit also encouraged manufacturers,

It is imperative to educate the company’s board on the significant impact of both – efficient or inefficient SCM, suggesting that the board’s attention can be gained by demonstrating how SCM can increase revenue without increasing marketing spends or capacity and reduce cost through lower inventories and a progressive reduction in conversion cost over years.

DR RAKESH SINHA, COO, GODREJ CONSUMER PRODUCTS retailers and logistics services providers to take a step back and review their product distribution strategy and supply chain in light of all the lean SCM models and best practices available in India today as well as learn what their counterparts and industry colleagues are doing to make their supply chains work at the most optimal cost.

PRICE TRENDS Road Freight Index Chart for April 2011

IRFI TREND FOR APRIL 2011: The RFI stood at 174 points for the month of April 2011 which has registered an increase of 1 point in comparison to the same period last year.

ZONAL FREIGHT TRENDS The overall freight rates have decreased significantly throughout India by almost 2%. This is due to restricted movements of cargo against adequate availability of trucks. The rates are mostly low down from North & East zones.

COMMERCIAL VEHICLES:

TRENDS FOR APRIL (Y-o-Y) 171

The cumulative sales of Commercial Vehicles registered a growth of 27%

161

171

173 174

168

between April-March 2011 as compared to the same period last year. Medium & Heavy Commercial Vehicles grew at 32% and Light Commercial Vehicles grew at 23%.

FORECAST FOR MAY 2011:

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

Index trend for six years

Through the RFI in May 2010 over May 2009 had registered an increase of 2 points, it is expected that volumes and freight rates may remain relatively flat in the month of May 2011.

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

MAY 2011 • SMART LOGISTICS • 21

VIEW FROM THE TOP

DIRECTOR, ASSOCIATED CONTAINER TERMINALS

‘We will expand on our existing capabilities to gain major marketshare’ 22 • SMART LOGISTICS • MAY 2011

“We would also look at organic expansion and at other emerging business avenues in the logistics arena,” observes, Bharat Joshi, Director, Associated Container Terminals (ACTL) during an exclusive interaction with Prerna Sharma. Excerpts…

THE IMPRESSIVE PROPOSITION OF DRY PORTS IN A LANDLOCKED STATE

will dramatically change the way we do business today as we will quickly need to ramp up our capacities.

A dry port, or in customs nomenclature, The DMIC, running along the an Inland Container Depot (ICD) or Dedicated Freight Corridor (DFC) over a Container Freight Station (CFS) is a distance of around 1,000 km, will serve essentially same as a sea port in terms as an elongated hub for commercial and FTWZ TO BRING ABOUT A of its scope and functioning. Functionally, industrial activities as well as logistics TRANSFORMATION FOR ICDs… you cannot distinguish between an ICD/ facilities. This is also slated to create An FTWZ is an interesting concept as it CFS as both are transit facilities, which different dynamics in terms of demand enables users of ports or an ICD to shift offer services for containerisation of break and also the throughput & efficiency. Delhi some of their value-adds, either imports or bulk cargo and vice-versa. These could be & National Capital Region, as well as the exports, close to the ICD. And it is a duty served by rail and/or road transport. western coast areas such as Mumbai are An ICD is generally located in the free zone, therefore a user can import a going to be the major parts of DMIC. interiors (outside the port towns) of the product from various places, carry out We are located in Faridabad, which is country away from the gateway ports. kitting and light assembly operations at an advantageous location for an ICD This is essentially helpful for land-locked an FTWZ, and then re-export. Similarly, in National Capital Region (NCR). The states like Haryana, Delhi-NCR, Madhya when it comes to exports, a user can transit time will be drastically reduced with Pradesh, etc. As far as functionalities of an perform last mile value additions at an this the advent of DMIC and DFC. This ICD are concerned, they include receipt FTWZ and then dispatch the same to will result in more business opportunities and dispatch of cargo, customs clearance, the port of delivery. Units in FTWZ can and in offering more value-added services consolidation & desegregation of less than trade in free foreign currency, source for to our customers. All in all, it will be container load (LCL) cargo, temporary and on behalf of supplier and buyer, and very interesting to be a part of such a storage of cargo and containers as well avail all export benefits at point of sale. promising growth avenue. as maintenance and repair of container Services such as packaging, re-packaging, As you know that supply chain units. Most importantly ensuring safety labelling, etc., and other services including touches every aspect of our lives, and I & security is a very crucial aspect of a procurement of materials for the purpose think DMIC will structure supply chain in successful ICD as we are ultimately the of value addition are exempt from all a more organised manner. It will enable custodians of cargo. local taxes and duties at an FTWZ. us as providers to work closely with On the other hand, a CFS is critical for customers, to offer them with the valueA PROMISING LANDSCAPE TO BE decongesting the port by shifting cargo and added services. It would ultimately aid in BROUGHT ABOUT BY THE DMIC customs related activities outside the port reducing the overall logistics cost. If we The Delhi-Mumbai Industrial Corridor area. It is an off dock facility located near can lower the cost of indirect inputs, i.e.

(DMIC) is going to concentrate on the logistics, then productivity and efficiency the servicing ports. These mainly deal with North-West corridor, which is one of the can greatly be enhanced. As a result, we break-bulk cargo originating/terminating in will be more competent as an the immediate hinterland of a economy. It is critical, though, port and may also deal with Logistics is an entire ecosystem. Once the that we implement the right rail-borne traffic to and from industry starts working together in a cohesive ‘software’ (IT systems, network, inland locations. manner, I think we will able to reach out to the etc.) that complements the BENEFITS OF AN ICD ‘hardware’ (logistics hubs, concerned government authorities to root out The biggest advantage of an industrial areas, etc). Without the inefficiencies experienced by us and provide ICD is that it fosters and an appropriate IT system to us an ‘industry’ status, which has been pending boosts international trade in integrate and optimise the since long. the true sense. ICDs increase functioning of all stakeholders trade flow as the ports viz. the DMIC, there is a risk busiest corridors for international trade get decongested, and enable increased of not realising the full potential of this with respect to the container trade and throughput velocity. Further, once cargo magnificent project. is also a major consumption hub. The is customs cleared at an ICD, no customs YOUR TAKE ON THE CURRENT emergence of DMIC will surely transform procedure is required at gateway ports.

STATUS OF LOGISTICS the entire trade landscape of the northern Additionally, an ICD greatly aids in reducing We are late adopters when it comes & western regions of the country. It inventory and transportation costs as well as in reducing overall level of empty container movement for the companies because it can be located near the centres of production and consumption. It is also a concentration point for long distance cargoes and its unitisation.

MAY 2011 • SMART LOGISTICS • 23

View from the top, continued

to implementing best in class logistics practices and that’s possibly a reason why have we not able to attract policy makers’ attention towards gaining an industry status. But the scenario is changing now and with the state-of-theart infrastructure to be developed in the near future, we would soon be able to provide our customers value-added services at an affordable cost. Logistics is an entire ecosystem. Once the industry starts working together in a cohesive manner, I think we will able to reach out to the concerned government authorities to root out the inefficiencies experienced by us and provide us an ‘industry’ status, which has been pending since long. But for that to happen, we first need to introspect ourselves and start operating as one unit and as organised players to reap the benefits of the opportunities coming our way.

YOUR EXPANSION PLANS We are right now at a stage of implementing a very advanced software solution at our ICD. It will help us in integrating our entire operations. On the hardware front, we are procuring some

of the best equipment available in the market. As far as expansion plans are concerned, we will further expand on our existing capabilities to gain major marketshare.

We are already offering project cargo facility to our clients, which in itself is a specialised service. In addition to that, we would be focussing on freight forwarding, as well as availing customs duty services to users. I think there are very few service providers who are able to offer such services in-house. Secondly, we would work at augmenting the capacity at Faridabad. We would also look at organic expansion and at other emerging business avenues in the logistics arena.

FACTORS HAMPERING THE GROWTH OF LOGISTICS IN INDIA There are various factors that are hampering the growth of logistics in India, which, if not addressed by the policy makers, can drastically impact the dynamics of the industry. These include: • Varying excise and tax laws that differ from state to state: Speedy implementation of GST would aid in addressing this.

• Non-uniformity in laws related to the loadability of trucks in different states: Uniformity is required across the country. For instance, Customs at various sea, air and dry ports across the country interpret the same laws differently, thereby creating barriers to mobility for the trade.

• Poor infrastructure considerably increases transit time coupled with toll payments at various points en-route, leading to wastage of time and increased transaction cost.

• Logistics is not given the status of an industry in India: Logistics can play a pivotal role in increasing the competitiveness of an economy and boost GDP growth through lowered transaction cost, which is critical in these times of high food inflation.

Special dispensations to encourage the logistics industry will go a long way in creating more structured and effective logistics capabilities.

• Red tapism dealing with government agencies, be it customs, road transport authorities, etc: Agencies need to be sensitised to the needs of a rapidly growing and evolving economy.

Our search for authentic and informative articles… solicits original, well-written, application-oriented, unpublished articles that reflect your valuable experience and expertise in the logistics industry.

You can send us articles, case studies and industry updates. The length of the articles should not exceed 2000 words.

The article should preferably reach us in soft copy (either E-mail or CD). The text should be in MS Word Format and the images in 300 DPI resolution and JPG format.

The final decision regarding the selection and publication of the articles shall rest solely with . ` 10

So, join our endeavour to provide relevant and useful content to our readers… rush your articles, write-ups to archana.nayudu@infomedia18.in

24 • SMART LOGISTICS • MAY 2011

l. 02 Vo

| Iss

ue

01 |

AP

RIL

2011

0/-

LOGISTICS PARKS INSIGHTS & OUTLOOK

The Indian manufacturing sector is garnering global applauses for its year-on-year growth. An effective tool and the means to achieve higher industrial efficiency include the development of state-of-the-art logistics solutions and setting up of world-class logistics parks. This strengthens the commitment of the country to become a one-stop shop for all logistics requirements in future and a viable business model for other developing countries to follow suit.

ANWESH KOLEY

LOGISTICS parks were initially referred to as ‘stuffing hubs’, but not without reason. The infrastructure in and around warehousing sites in India was anything but a viable business model for existing operators, let alone the new and prospective ones. However, the increasing importance of logistics at various stages of business has prompted companies and the government alike to develop hubs that can stand up to their task of providing storage and transportation solutions and also serve as models for others to follow.

Not only is this an improvement with time, but is also an industrial requirement.

Companies in India spend as much as 13-14 per cent of total product costs on supply chain compared to 5-7 per cent in the developed countries.

When the concept of logistics parks was introduced, their main function was to centralise the operations of a company by using shared warehousing and transportation infrastructure. Since then, the concept has evolved to include a broader array of services, primarily because it has attracted more government support and a wider range of logistics services providers willing to invest in it.

The increase in global logistics outsourcing business has thus spurred the growth of logistics parks.

Today, logistics parks have assumed special importance in India due to the recent surge in the cargo and freight traffic across all cities. Hence, the government has undertaken the task of utilising its surplus land area provided to the Railways for the development of multimodal logistics parks (MMLPs) along the dedicated freight corridors (DFCs) across the country. Spanning an area of 400-500 hectare, these parks were planned to be developed through both, government and

facilitate the growth of logistics through public private partnership (PPP) models.

These include the Golden Quadrilateral, the DFC, the dedicated industrial corridor, the east-west and north-south expressways as well as privatisation of rail for freight movement. All these projects are at different stages of implementation and will take several years to become fully operational. What cannot be ignored is that the landscape of logistics is changing for the better.

Logistics parks should be considered a ‘strategic enabler’ and not merely from the perspective of cost reduction, as it does not have a set formula.

RAMESH AGARWAL, DIRECTOR, AGARWAL PACKERS & MOVERS private funding. “Conventionally, logistics parks were just stuffing and warehousing sites. However, now, due to factors such as the rapid transformation of the logistics industry and globalisation, logistics parks have started providing value-added services,” says Naresh Contractor, Manager – Sales, Rushmi Logistics.

THE CURRENT SCENARIO The Government of India has announced several strategic infrastructural projects to

The construction of DFCs has added to the ease of setting up logistics parks. The approximately 3,300-km stretch covered by the DFC project provides an opportunity to successfully implement the model parks at strategic locations. These MMLPs are hubs planned at select locations along the DFCs, which will provide state-of-theart integrated logistics facilities, with mechanised handling and intelligent inventory management.

MAY 2011 • SMART LOGISTICS • 25

Logistics parks, continued

The concept of logistics parks has received a commendable response from the logistics industry. DHL has already set up a state-of-the-art facility in Sriperumbudur, sprawling over an area of 2,60,000 sq ft. The facility offers a variety of services such as warehousing, WMS, Importer/Exporter On Record, in-house customs clearance for incoming and outgoing cargo and assembling of completely knocked down (CKD) and semi-knocked down (SKD) kits. India’s largest supply chain and logistics company – Safexpress – has its high-tech logistics park in Ahmedabad. Covering a large land area of 2,74,000 sq ft, this ultra-modern logistics park provides its clients with cutting-edge trans-shipment and thirdparty logistics (3PL) services.

THE LOGISTICS PARK ADVANTAGE The aim here is to reduce the overall logistics cost in the supply chain for customers; thus, leveraging the efficient and high-capacity rail connectivity of DFCs with logistics parks. This enables the development of a set-up that is capable of meeting time-sensitive freight transportation requirement. “Logistics parks should be considered a ‘strategic enabler’ and not merely from the perspective of cost reduction, as it does not have a set formula,” believes Ramesh Agarwal, Director, Agarwal Packers & Movers.

Manish Saigal, Executive Director, National Advisory Head – Transport & Logistics, KPMG, says, “Our exportimport (EXIM) volumes are constantly growing and so are our domestic trade volumes. The need of the hour is to manage the bulk transport of all cargo on time and the DFCs do just that.” He adds, “Although currently, we lack the essential infrastructure, the government and private partnership will eventually work out.”

The idea of having a dedicated logistics park is to make all essential logistics requirements available at a single point, thereby making it easier for companies to deliver their shipments and keep a track of them. Agarwal opines, “Logistics parks also create community and economic benefits such as reducing pollution levels, providing a single-window clearance system, enabling greater industrialisation and a clear focus on environment management.”

NEED FOR MORE When setting up a holistic logistics park,

26 • SMART LOGISTICS • MAY 2011

various things need to be taken into account. According to Agarwal, “The government should improve transport connectivity, strengthen the competitive and regulatory environment, grant industry status to the segment and also create skilled workforce for the logistics business. Five-year tax holidays as well as exemption from service tax would also be of help.”

Besides, a logistics park must have certain features for smooth operations.

The amount of activity in such a park is enormous and requires perfect coordination among all departments operating within the park. Thus, a sound organisational structure is a must.

such hubs, which is typically an expensive affair.” He adds, “The pricing of the site area should also be fair so that the developer and the company do not feel cheated. The implementation of GST norms will further accentuate the need for quality parks.”

Apart from land, other essentials need to be considered while developing a stateof-the-art logistics hub. “The proximity of the logistics park to a railway terminal or an air cargo complex, or both, is a must. There should be an intermediate container terminal and warehousing facility with temperature control and an ambient arrangement,” adds Agarwal. Another key requirement is the availability of insurance

Our EXIM volumes are constantly growing and so are our domestic trade volumes. The need of the hour is to manage the bulk transport of all cargo on time and the DFCs do just that.

MANISH SAIGAL, EXECUTIVE DIRECTOR, NATIONAL ADVISORY HEAD – TRANSPORT & LOGISTICS, KPMG

Contractor suggests, “The best storage facilities should be made available.

There should be a custom-bonded area coupled with spacious warehouses and dedicated areas allocated for import and export activities. The parks should have RTGS and the latest cargo-handling equipment. Considering the vast size of the parks, transportation facilities should be established in the park. Proper cargo weighing arrangements should also be made.” Agreeing with this, Agarwal says, “To make logistics parks viable, a master plan should be made of various divisions within the parks and unrestricted traffic flow between states.

Also, the development of parks should be undertaken by specialised infrastructure service providers.”

THE ROAD AHEAD Setting up multi-modal parks with world-class infrastructure is a challenge, as bottlenecks are bound to arise at different levels. Saigal opines, “World-class technology will require heavy investments and operations through the years in order to provide return on investment (ROI), which makes them commercially viable.”

Commenting on setting up of logistics parks, he says, “A major problem here is the availability of land. We need large stretches of undisputed land to construct

houses around the facility, for easing out the financial part of logistics.

Further, cooperation is required among various states along the DFCs for setting up these parks. Past records, however, do not give a favourable picture. Numerous interstate projects have either failed or have been delayed due to a lack of coordination between state governments.

Although the railways has finalised the land area for acquisition, several states still have not provided a clear blueprint of the sites to be identified, mode of investment and organisational arrangements.

BRIGHT PROSPECTS Some of the recent announcements by major logistics and transportation solutions providing companies about setting up world-class logistics parks strengthen their commitment and requirement for a one-stop destination in logistics, which will not only trigger faster delivery of shipments but also provide a model for developing countries to follow.

Worth mentioning is the scope of additional employment generation, which is an added advantage. The future of logistics parks in India is not only economically and industrially bright but is also a potent tool for a growing economy to attain the tag of a world-class logistics services provider.

INSIGHTS & OUTLOOK

PERKS OF LOGISTICS PARKS

AIDING GROWTH, ADDING VALUE

Key government policies and infrastructural changes are facilitating a tectonic shift in the logistics industry towards improved performance. One such shift is the revolution towards multi-modal and hi-tech logistics parks which have opened up avenues and opportunities for manufacturers, retailers, suppliers, and logistics players to build a seamless future supply chain.

PURNA PARMAR INDIA

has become the prime destination for logistics service seekers all over the world. The demand for logistics services in India, which is largely driven by the remarkable growth of the economy, is expected to gain greater momentum in

28 • SMART LOGISTICS • MAY 2011

the years to come.

With various upcoming infrastructural projects like logistics parks & hubs and other initiatives by the public & private sectors in the country, notwithstanding the dismal infrastructure, the future of

the logistics sector in India appears bright.

However, the future of this sector depends not only on continuous development of infrastructure, but also on the capability of service providers to adapt themselves and make optimal utilisation of new

technologies.

In addition, the development of logistics zones has been an important component of globalisation, as the growth in international trade and related material flows requires activities supporting their consolidation, deconsolidation, transloading and light transformation.

THE INDIAN SCENARIO

Image Courtesy: Arshiya Free Trade & Warehousing Zone (FTWZ) at Panvel, Mumbai

Logistics plays a key role in reducing cost and improving serviceability across industry sectors. However, till date, India has only had standalone warehouses without essential support facilities to meet its storage requirements.

Most distribution centres, warehouses, container freight stations, inland container depots and container yards work with minimal infrastructure facilities and limited use of IT. But India, which is witnessing a steady growth rate and is close to becoming the third largest economy, requires worldclass logistics parks to facilitate storage and movement. Ajay S Mittal, Group CMD, Arshiya International says, “Most international companies look for infrastructure that is at par with global standards to ensure product safety and sanctity.

This has prompted several companies to look at investing in logistics parks with facilities akin to competitive economies such as Singapore and Dubai.

Logistics cost in India is fairly high – at about 14 per cent of gross domestic product (GDP) – as against 8-9 per cent in most developed nations.

On a 1 trillion GDP, this figure represents an absolute value of inefficiency, and hence the logistics market potential of over $50 billion. State-of-the-art logistics parks supported by integrated logistics facilities will play a major role in bringing about the desired efficiency and bringing down logistics cost in the country.”

THE GROWTH STORY The Indian logistics parks industry is rapidly growing. Over the last few years, several companies have invested heavily in this

sector. According to Vineet Kanaujia, GM – Marketing, Safexpress, “India is currently witnessing a warehousing revolution.

Safexpress has recently opened 13 new logistics parks spanning a total area of two million sq ft. We have made healthy investments in the warehousing business.

Currently, the Indian logistics industry is worth `110 billion and warehousing constitutes 20 per cent of the total logistics industry.”

According to Kanaujia, the Indian supply chain and logistics industry is largely fragmented and can be strengthened only if the entire industry converges and works in unity. However, the organised component of the industry needs to grow at a faster pace than the rest of the industry. “The industry can grow only when the organised players work in consolidation. Once the organised players grow, they will bring in international practices and established processes and improve the logistics and supply chain practices. This leads to good quality warehousing and improved supply chain processes. Especially when Goods and Service Tax (GST) comes into play, logistics parks will play a significant role in streamlining supply chain processes and bringing in international standards,” opines Kanaujia.

PERKS OF LOGISTICS PARKS In today’s economic scenario and international competition, which is characterised by short product shelf-life and thin profit margins, companies are

distribution cluster is also an intermediary that links regional production with national and global markets.”

In addition, logistics parks offer major benefits (eg. competitiveness, security & credibility and flexibility to increase/ reduce warehousing space) to customers.

Logistics parks also make all the requirements available at one place. Mittal says, ”Logistics parks offer companies an environment that facilitates operations.

These are marked by smart warehouses, which not only ensure efficient utilisation of space, but also better inventory visibility and safety. These have multimodal connectivity to enable faster and cost-effective product movement. Most of these have facilities that enable companies to perform value-added services before organised shipment. Logistics parks like free trade warehousing zones (FTWZs) also provide duty and tax incentives and enable trading while bringing about a positive impact on companies’ bottom line.”

Showing another aspect, Agarwal says, “The cost advantages of leasing space in a logistics park and the difficulty of securing land independently (unless it is attached to a manufacturing facility of the company) mean that setting up one’s own logistics space is not feasible for most companies.”

LATEST TRENDS The Indian logistics industry has been dominated by unorganised players since

In many logistics parks, owners are even making customised warehouses as per the customer’s requirements and specifications. In addition, owners are providing facilities like food stalls, drivers’ rest rooms, medical facilities, guest houses, etc.

AK AGARWAL, Director, DRS Group forced to cut down on their logistics and supply chain costs. In this case, logistics parks prove beneficial as they help companies significantly reduce their costs.

AK Agarwal, Director, DRS Group informs, “A logistics park offers opportunities to mitigate inefficiencies through various economies of agglomeration. These can act as functional intermediaries between customers (for manufacturing or final consumption) and terminals (or regional suppliers) from where parts and goods are received. For exports, a freight

long. This has made the process more complex and costly, as companies had to deal with multiple logistics parties.

But as companies are increasingly focussing on their core competencies, they prefer to outsource the logistics function.

Capitalising on this, the logistics sector is integrating its various functions. This reduces the dependence of companies on multiple parties. It not only facilitates better co-ordination but also improves efficiency.

Mittal informs, “Along with integration

MAY 2011 • SMART LOGISTICS • 29

Perks of logistics parks, continued

of the logistics function, there is a need to support it with quality logistics infrastructure. Investment in logistics infrastructure has increased from $201 billion in the government’s 10th Five-Year Plan to $492 billion in the 11th Five-Year Plan. This investment is also supported by private companies, like Arshiya International, investing in establishing state-of-the-art logistics parks with modern amenities to bring down the logistics cost and ensure the desired efficiency.” Agarwal adds that the latest trend in logistics parks is to set up separate warehouses (eg. dry warehouse, RCC sheds, cold storages, temperaturecontrolled warehouses with different heights) for different types of products within the complex.

KEY ATTRIBUTES Keeping in mind the highly competitive market scenario, it is imperative for companies to have a seamless and cost-

“Goods that cannot be stored in warehouses will require odd dimensional cargo (ODC) yards, container yards with pavement quality concrete (PQC) flooring to allow stacking up to six levels, with the help of world-class equipment like rubber tyre gantry cranes (RTGCs). As land is a scarce resource, especially in key areas, efficient utilisation of space becomes important to ensure maximum storage and minimum rentals.” He adds, “This has made companies like Arshiya International construct 13 m-high warehouses with seven-level racking systems against the conventional 4-6 m high warehouses in India.”

Modern warehouses should also have dedicated value-added service (VAS) area for value addition before organised shipment. Another important feature of the modern-day logistics parks is ensuring the safety and security of products.

Product pilferage is a major problem in existing warehouses. This should be

The industry can grow only when the organised players work in consolidation. Once the organised players grow, they will bring in international practices & established processes and improve the logistics and supply chain practices.

VINEET KANAUJIA, GM – MARKETING, SAFEXPRESS effective supply chain. Logistics parks essentially must have proper infrastructure, eco-friendly supply chain processes, global standards, advanced IT solutions, highlevel automation as well as professional workers operating the logistics parks. In addition, logistics parks must be set up at a convenient location.

Logistics parks of today are no longer mere storage houses. They include efficient warehousing space supported by IT-enabled warehouse management systems (WMS), which help companies to have real-time visibility and total control over their inventory. On this, Mittal suggests, “Modern logistics parks should have customisable storage space to cater to different product storage requirements.

It should include additional storage facilities like temperature-controlled storage such as freezers, chillers, selective pallet racking systems or a narrow aisle racking system with state-of-the-art material handling equipment and automated storage and retrieval system based on product requirements.”

30 • SMART LOGISTICS • MAY 2011

prevented by using modern technologies like IP-based CCTV systems and IP-based access control systems for continuous monitoring of the entire facility. Security and safety of products and manpower also require continuous fire monitoring and fighting facilities.

Another important attribute of modern logistics parks is having robust systems in place for data, video & voice connectivity and data backup. “The presence of business support services like office space, banks, insurance, medical facilities, food courts and other support infrastructure like maintenance and repair (MNR) yards, scrap yards, etc. also facilitate business activity. These will go a long way in improving efficiency in the logistics space,” Mittal adds.

Agarwal adds, “In many logistics parks, owners are even making customised warehouses as per the customer’s requirements and specifications. In addition, owners are providing facilities like food stalls, drivers’ rest rooms, medical facilities, guest houses, conference halls, internet

cafes, ISD/STD booths, photocopy & fax facilities, petrol pumps, weighing bridges and small shopping complexes.”

LOGISTICS PARKS OF THE FUTURE Elaborating on how future logistics parks will be, Agarwal says, “Future logistics parks will be very advanced with respect to technology, safety, designs and facilities.

These will be equipped with modern and latest mechanism for loading and unloading, which means faster and safer movements of goods. This will drastically reduce the turnaround time of their products cycle, ie, from manufacturing to point-of-sale, which means increase in profits and faster realisation of their investments.”

Agarwal says that all these can be done with the help of big IT and telecom service providers. “We must adopt the latest technology and methodology for building logistics parks. We need to study the current models and practices adopted in European countries in order to keep pace with them. The government should help the logistics industry by giving it an industry status, investing majorly for developing the infrastructure and uniform statutory requirements across the country. A major focus should be on the connectivity of IT, vehicles and availability of manpower,” adds Agarwal.

BUILDING FUTURE LOGISTICS PARKS India’s logistics sector has attracted huge investments, leaving behind some of the major sectors including, aviation, metals and consumer durables. The flourishing retail & manufacturing industry and commodity markets, and the development of special economic zones (SEZs) are the key factors that have given a boost to the growth of the Indian logistics industry. The industry is all set to witness exponential growth in the coming years. Increased participation from both public and private sectors is crucial for developing logistics and improving supply chain management.

Logistics companies not only need to create efficient businesses to thrive in the logistics sector, but also need to explore ways for investing energy, cost and time to build a strong logistics system. In order to become a global leader, India needs to address these issues. Nonetheless, with high-tech logistics parks and VAS as well as customised features, the future of Indian logistics parks does look bright.

LEADERSHIP SERIES

ARSHIYA’S FTWZ

Welcome to the era of progress and prosperity…an era, which is marked by constant growth and opportunities. Though marred with challenges, the Indian logistics landscape is about to witness a paradigm shift with the coming up of a free trade warehousing zone (FTWZ). By developing the country’s first-ever FTWZ, Arshiya International has laid the foundation stone for an impressive growth of Indian logistics industry on the global map.

PRERNA SHARMA & SANDEEP PAI AS the second fastest growing major economy in the world, India has tremendous potential as a market for selling as well as sourcing products for international corporations looking to leverage on India’s cost & skill arbitrage.

India’s greatest opportunity lies in tackling its biggest challenges in the space of logistics. How? Well, let’s look

32 • SMART LOGISTICS • MAY 2011

at some hard-hitting facts. The logistics cost in India is fairly high at around 14 per cent of GDP as against 8-9 per cent in most developed nations. On a US$1.6 trillion GDP, this represents an absolute value of inefficiency of over US$65 billion. There is more to it. India loses approximately 35 per cent of its farm produce to wastes on account of

lack of proper logistics infrastructure.

In India, the delay in reaching medicinal drugs to the market costs around US$1 million per day. This inefficiency reflects on all the products being manufactured, consumed, warehoused and traded in India.

Fortunately, there is a way to eliminate all these inefficiencies from the system.

Arshiya’s FTWZ and integrated infrastructure will pioneer a whole new dimension in India’s logistics landscape.

We are excited about the opportunities to make India a regional warehousing and value-addition hub. Our vision as a fully integrated supply chain management & logistics infrastructure solutions company is primarily driven by the belief that innovative solutions for efficient supply chain management in India will come from India alone; where the need for accelerated transformation is not just an opportunity but mandatory to India’s economic development.

– AJAY MITTAL, Group Chairman & MD, Arshiya International ENABLING FACTORS OF FTWZs IN INDIA

Successfully implemented by various countries in the past, the concept of free trade warehousing zones (FTWZ) has been reaping fruitful benefits for countries since decades. In simple terms, a FTWZ is a special economic zone wherein mainly trading, warehousing and other activities related thereto are carried out.

International free trade zones are placed mostly in developing countries.

Free trade zones came into prominence in Latin America in the initial decades of the 20th century. Today, there are around 3,000 international free trade zones spread over 116 countries around the world, where nearly 43 million people are working. But why does this concept hold strategic importance for the Indian industry?

While consumption in India in real terms will grow fourfold i.e. presently from US$378 billion to US$1.56 trillion by 2025, the reality is that India ranks 17 in terms of importing world products, consuming just over two per cent of globally produced merchandise, but growing at 35 per cent. While by 2020, India is projected to have an additional 47 million working population, almost equal to the total world shortfall, with an average Indian age of 29 years fuelling our ability to become a manufacturing Mecca of the world, the reality is that India ranks 26 as per WTO in terms of exporting world products contributing just over 1.3 per cent of globally consumed merchandise, but growing at 22 per cent.

India’s container throughput in CY10 was just over 7.7 million TEUs, as compared to Dubai (12 million), Singapore (24 million) and China (186 million) – indicating zero penetration into value addition, hubbing and re-export market.

The FTWZ regulatory framework will give India the much needed impetus to drive its economic growth to the next level, while truly leveraging the nation’s vast domestic market and purchasing power parity. Over the last few decades, India has been losing investments to neighbouring economies, which were

being used by global corporations as a basis for delivering to the Indian market because of unavailability of similar infrastructure.

With FTWZ, the country will be able to leverage ‘soft infrastructure’ such as skilled manpower, cost competitiveness, regulatory framework, IT connectivity as well as ‘hard infrastructure’ such as dedicated state-of-the-art mega logistics parks, rail connectivity and world-class supply chain management services.

THE COUNTRY’S FIRST EVER FTWZ Though we have been late in recognising its prudent importance, India has taken the first step towards establishing such a lucrative proposition with the emergence of India’s very first FTWZ in Mumbai.

Strategically located 24 km away from the country’s busiest major port, Jawaharlal Nehru Port Trust (JNPT) is the country’s first FTWZ by Arshiya. A landmark feat achieved in the history of Indian logistics, this FTWZ is surely seen as the game changing proposition by many. Gaining the first-mover advantage in this space, Arshiya International has a 10-year legacy in the logistics industry. It has a vision to reduce India’s ‘last mile’ logistics & supply chain cost from 14 per cent to 9 per cent.

When asked about Arshiya International’s vision to create such a unique proposition, Ajay Mittal, Group

MAY 2011 • SMART LOGISTICS • 33

Arshiya’s FTWZ, continued

Success of FTWZs globally China From an economically backward country in 1970 to its gigantic success, FTZs have been the single most critical macroeconomic factor for China’s rise.

• FTZs are operational since 1980.

• Waigaoqiao FTZ in Shanghai is spread across an area of 10 sq kms & over 9,300 companies registered in the zone, including 135 of the Fortune 500 companies.

• Other zones being – Zhuhai (3 sq km), Ningbo (2.3 sq km), Xiamen (5 sq km), Futian (1.35 sq km), Shatoujiao (0.27 sq km) & Yantian Port (0.85 sq km).

Singapore Due to FTZs, this island nation has become the gateway to Southeast Asia and a global distribution hub for international companies.

• FTZs were first established in the island nation in 1969, and today the entire country is a free trade zone.

• Notable FTZs being – Keppel (2.59 sq km), Pasir Panjang (0.65 sq km), Jurong (0.61 sq km), Sembawang (0.19 sq km) & Air Logistics Park of Singapore at Changi Airport.

• Over 7,000 multinational companies operate through these zones.

Dubai Even with an economy which is purely a transhipment hub, with comparatively low level of domestic consumption, FTWZ has been a game changer for Dubai.

• Established in 1985, Jebel Ali Free Trade Zone (JAFZA) is spread across an area of 48 sq km, with over 6,400 companies operating in the zone, including 120 of the Fortune Global 500 enterprises.

• Accounts for 25% of all container throughput at Jebel Ali port & 12% of all air freight at Dubai International Airport.

• Over the years it has created over 1,60,000 direct jobs in the UAE through its companies.

• Increased its revenue at an average of 34% year-on-year.

• Contributed to Dubai’s GDP at 25% on a year-to-year basis.

• Accounted for more than 50% of Dubai’s total exports.

• Accounted for 20% of all FDI inflow into the UAE. • Grown its customer base by over 60% in the last four years.

Chairman & MD, Arshiya International, revealed, “The total Indian freight system carried approximately 2.8 billion MT of cargo in FY10; whereas road enjoys the highest market share. It is reported that India burnt US$2.5billion on fuel on account of trucks standing on check posts.

Moreover, the road transportation sector in India remains largely unorganised with an average trucker in India owning only about seven trucks. Added to the above, India is ridden with the inefficiencies consistent with the unorganised 3PL/4PL network with no true pan-Indian players who can offer best in class supply chain

34 • SMART LOGISTICS • MAY 2011

solutions. These are some of the factors that made us realise the true potential of setting up an FTWZ in the country.”

UNIQUE OPERATIONAL ENVIRONMENT A real boon for importers and exporters, FTWZs are deemed foreign territory where warehousing, trading and value addition can be performed with the help of Arshiya’s state-of-the-art infrastructure and expert personnel. This will enable India to compete with its cost and skill arbitrage in regional hub and also process cargo in & out of India more efficiently,

thereby improving logistics connectivity of India.

FTWZ heralds an operational environment that will position India as a global hub by providing best practices such as: • It has been declared a dry port with Port Code ‘INPNV6’ for allowing dedicated movement of cargo.

• Duty deferment benefits for upto two years • Option of performing quality control prior to payment of duty • Elimination of internal traffic network - The internal road network of FTWZ is capable of handling a traffic intensity of at least 2,400 trailers a day, each carrying a maximum gross load of 70 MT. - An eight-lane entry and exit area for Customs checking negates traffic bottlenecks.

• 8,000+ container stocking capacity facilitated by six-level container storage to provide space optimisation benefits • Excellent security solutions ensuring maximum safety of product • Integrated building management system

by IBM • Fire Detection System, IP-based hybrid CCTV system & IP-based global access control system by GE Security • Converged infrastructure solution for monitoring complete facility: Facility 2.0 Compliant by Cisco • Evacuation and announcement system to address any kind of emergencies through a seamless solution by Bosch • Business ancilliary services such as Banks and Insurance will also be built in the facility.

With such a unique operational environ, the FTWZ is slated to increase operational efficiency of a company’s product movements, either from the manufacturing plant to the store or from the port where the product lands to the shelf where the customer buys the product.

GLOBAL INFRASTRUCTURE BENCHMARKS The company has made concerted efforts in building a world-class infrastructure at par with the logistics infrastructure presently available in Singapore, Dubai and China.

Spread over an area of 165 acre, a total of 16 general purpose warehouses and 4 specialised warehouses. Specialised

Over-sized cargo being stored at Over Dimensional Cargo (ODC) yard

Photo By Joshua Navalkar

warehouses are for storing hazardous goods. Also there are strong rooms for precious commodities such as gold and silver; as well as chiller freezers, which can operate from -25 degree to 3 degree.

An efficient utilisation of space is ensured by introducing 13m high warehouses against the conventional 4-6m, optimising storage rentals. Warehouses are designed for sustaining seismic zone 4 earthquakes.

Each warehouse has over 14,000 pallets with selective racking arrangement.

The company has used super flat flooring because the material handling equipment has to go 11 m high. Best in class material handling equipment such as Rubber Tyre Gantry Cranes (RTGCs), reach stackers, reach trucks, cranes, hydra, hand pallet trucks and forklifts have been utilised for ensuring safe handling. There is also a provision for storing over-sized cargo in the Over Dimensional Cargo (ODC) yard.

narrow aisle (VNA) racking systems • Dedicated warehouses that include bulk, temperature-controlled, sanitised, chillers, freezers, strong-room and hazardous storage • All the warehouses have been designed to handle heavy cargo as they have been built keeping TR34 standards with point load capacity of 9MT.

VALUE-ADDED SERVICES Consolidation of cargo is one of the biggest value propositions that Arshiya offers. Exemplifying the same, Mittal said,

“Take the examples of a mobile company.

It has around 7-8 components, which come from different places and need to be assembled at a place for selling the product in the regional market like India.

Before the advent of an FTWZ in India, most of such activities used to be carried out in Dubai, which resulted in increase in the cost of product and unnecessary delay. Now all this can be performed at our FTWZ with duty deferment benefits.

Additionally, it can be sent to the market for selling whenever a demand is generated.

Suppose if goods remain unsold, you can

The logistics park also has: • Storm water drainage system with a capacity to handle rainfall with peak intensity of 156 mm/hour in addition to 10 cubic m per sec ie, three times the rainfall Mumbai witnessed on July 26, 2005.

• Enhanced height provides flexibility of choice between conventional selective pallet racking (SPR) vis-à-vis very

Photo By Joshua Navalkar

PRODUCT STORAGE SENSITIVITIES

Value-added services being performed at Arshiya’s warehouse

MAY 2011 • SMART LOGISTICS • 35

Arshiya’s FTWZ, continued

still send it back to the place of origin.

Moreover, we can customise it for them.

For instance, if a company wants to sell it to local market, we can put instruction in the regional language as well.” He further added that this kind of a proposition has not only brought in immense benefits for a company but has also brought huge opportunities for the country in terms of generating additional employment as well as in realising the position of a sourcing hub. Not only this, a client sitting in any part of the country can even monitor the services online. Such is the expanse of an FTWZ that if realised will prove to be a major boon for companies planning to scale their presence in the market or for companies planning to enter India.

LEADING SUCCESS STORIES Companies operating in different verticals have a unique set of requirements when it comes to storage and movement of goods. Some of the critical avenues smartly managed by Arshiya are:

One of the world leaders in wines and spirits business with a presence across 180 markets is using Arshiya’s Mumbai FTWZ for storage of imported bottled in Origin (BIO) wines and spirits for distribution in India. These wines and spirits attract very high customs duty of around 160 per cent. By using FTWZ, the company has found flexibility towards end distribution in India and unlocking of working capital as goods can be stored in the FTWZ without paying customs duty for up to 2 years.

Additionally, lead time has also been reduced substantially as the goods are stored closer to the market.

Moreover, value-added services such as packaging, re-packaging, labelling, etc., there is an exemption on special additional duty (SAD) on clearance of raw materials through FTWZ and exemption of VAT/ CST in case of direct sale to their distributers. These are just some of the advantages that a company can gain by utilising the services of an FTWZ.

OIL & GAS One of the clients, operating in the upstream oil and gas industry, uses

36 • SMART LOGISTICS • MAY 2011

IMPRESSIVE INVESTMENT PLANS Arshiya believes that no problem is insurmountable. There is always a way.

There is a way to transcend boundaries, to strengthen partnerships, and ultimately to change the face of Indian logistics across the world. Along with FTWZs, the company is also investing in the development of rail infrastructure to provide pan-India rail freight operations, building Rail terminals in strategic locations across India. Once integrated, Arshiya’s rail logistics network can help in aggregate & consolidate products for domestic movements as well as customise rail containers for faster and more efficient product loading & unloading. The company is also in the process of developing domestic distriparks as regional distribution hubs for domestic and EXIM cargo, towards product consolidation for inland movement. Very soon, it would roll out the second FTWZ at Khurja, near Delhi followed by Nagpur with plans afoot for one in Chennai and one in Eastern India.

DAWN OF A NEW ERA

Photo By Joshua Navalkar

WINES & SPIRIT

imported machineries and consumables for its projects in India. By taking the valuable services offered by Arshiya FTWZ, the machineries and consumables are exempted from duty payment until project completion. As soon as the machinery comes to the FTWZ from the DTA, it is considered as export and satisfies the compliance set by the customs. This saves the logistics cost of transporting it to Singapore/Dubai and provides the ability to supply the required machineries and consumables to clients as and when required, thus reducing the supply lead time. For one of their clients, which is a foundation contractors, it used to takes at least 2-3 months to dispatch an equipment once the order is placed by the customer. To reduce such a big timeframe, they tried various options for another mode of transaction. With the coming up of FTWZ in India, they aim at realising 90 per cent of their sales through FTWZ. With such success stories, no company can undermine the significance of an FTWZ in the country.

Efficient utilisation of space is ensured by introducing 13m high warehouses against the conventional 4-6m, optimising storage rentals.

With this lucrative proposition, India will emerge as a major economic hub for companies either importing, exporting or performing value additions to its products. Additionally, it will broaden the scope of India’s economy from its present manufacturing & service centric model to include trading, warehousing, consolidation, thereby opening the market for more investments, which were directed to neighbouring Asian & Middle East economies, due to the lack of infrastructure set up in India. It will immensely boost India’s exports as more companies will be able to stock, source and make products closer to their suppliers based in India, driving cost savings and thus competitiveness, resulting in more investments. Each zone will directly employ in excess of 5,000 people and will directly create employment for over 10,000 people in terms of development of surrounding economy & facilitating the growth of support services industry. With such a promising start, FTWZ landscape in India is surely going to be bigger & better.

SUPPLY CHAIN NEEDGAPS SL EXCLUSIVE

MANAGEMENT

co

SYSTEMS

on

cus

pro fit ID i utom toam ation RF er satisfact

rcia mme

l

le vehicv a

noon i

t

MATERIAL

handling

logistics

par k

INER

cargo

ATICS

logistics

TRADE

party

CONTA

third

profit

FID

solutions

T E LE

R

cost-effective

GLOBAL

S

y

TRANSPORTATION

t

n

bili

inland connectivity

CVT

WAREHOUSE ENVIRONMENT fleet management

e

GP

LY

CONSUM

infrastructur

ER

flex i

multi-

GPS modal

WAREHOUSE

TEMPERATURECONTROLLED

radio

frequency identification

S

U c ma h n

SYSTEMS

GISTICS LO

NOL GY CH

PP in a ement ag

TE

CAN OINDIA DELIVER A BETTER

MODEL

A large number of Indian organisations today are developing and implementing a comprehensive supply chain strategy and then linking that strategy to deliver bottom line results. However, owing to factors such as unstable economic conditions and increasing market dynamics, companies, today, have to evaluate the adaptability and efficiency of their supply chain. Bringing in innovation at every stage of the supply chain will offer them a strategic solution, which will not only help them satisfy customer demand, but also help them improve their overall performance and stay ahead in the global marketplace.

SUDHIR MUDDANA COMPANIES today are constantly searching for ways to stay ahead and tackle cut-throat competition. In such a scenario, a company can set itself apart from others only by providing the best services and delivering goods & services to customers without any delays.

The central aim of supply chain management is to have the right products in the right quantities at the right moment and in the right place, all of which need to be achieved at minimal cost since these have a great impact on customer satisfaction, inventory management and flexibility.

Customer satisfaction is highly dependent on the flexibility of the supply chain, i.e. its ability to respond to the changes in demand. However, flexibility in supply chains is often lacking due to long lead times, uncertainties and

unforeseen events. To counterbalance this lack of flexibility, companies keep inventories at various levels of the supply chain. Therefore, balancing the costs of customer dissatisfaction and holding inventory is a classic issue of logistics and supply chain management. Keeping this in mind, companies ought to carefully examine their supply chain models & networks and do the needful in order to fill in the need gaps. This can be achieved either by adopting the appropriate supply chain model after making the desired modifications to the existing one, or by innovating and coming up with an all new supply chain model that best fits their business and the Indian markets as well.

SUPPLY CHAIN MODELS In the present scenario, the logistics industry has and uses a large number

of supply chain models, be it from transportation to inventory management.

However, the ‘hub and spoke’ and the ‘push and pull’ models are widely used in the Indian logistics industry. Even though companies using these two models have reaped benefits, in order to ensure a 100 per cent penetration into the Indian markets, there is still need to improve the way logistics functions.

In order to strengthen their supply chains to serve the vast and dynamic customer base, companies need to select and use the necessary supply chain models that best meet their requirement. Commenting on the supply chains used today, Suneel Aiyar, Associate Director – Consulting, Supply Chain, PricewaterhouseCoopers (PwC), says, “Widely used supply chain models were designed to take advantage of the tax structure through a fragmented

MAY 2011 • SMART LOGISTICS • 37

Supply chain needgaps, continued

distribution structure. However, that does not leverage scale. The traditional model was operated by bargaining with transportation and warehousing service providers. This led to a paradox of low cost using inferior practices and minimal investments. In my view, these have to change in order to offer competitive advantage.”

Carrying Aiyar’s thought forward, Anil Khanna, MD, Blue Dart, explains that there are various supply chain models tailormade for various industries. Their success depends on how well Indian companies align their logistics and supply chain objectives with their business objectives.

However, due to some anomalies and diseconomies of scale/scope, most of them are not able to reap full potential benefits. Even though the logistics industry expects the Centre to take various initiatives to improve infrastructure to ensure better functioning of various supply chains, Indian firms and their supply chains need to closely integrate into a network. All ensuing complexities should be managed. Aligning their business

IMPLEMENTING PROGRESSIVE MEASURES While the adopted supply chain models have proved to be useful for companies, a number of improvements have to be made to ensure that they help companies meet the requirements of customers.

Enumerating the improvements that have been made in these models, Aiyar says, “Supply chain models are undergoing significant changes due to several reasons such as the GST regime, growth in rural markets and increased competitive intensity. MNCs have developed unique hub and spoke distribution systems to capture the rural markets. Also, there is an increased collaboration across players moving complementary products to share their logistics systems to gain scale. Logistics service providers are tweaking the models to support last-mile distribution. And lastly, on the upstream, increasingly suppliers are co-locating their base near the manufacturer (we are seeing a rise of clusters). While external influences also play a crucial role, these models have been successful as they have

Characteristics of the 2016 Future Supply Chain • The future model will be based on multi-partner information sharing among key stakeholders: consumers, suppliers, manufacturers, logistics service providers and retailers.

• After production the products will be shipped to collaborative warehouses in which multiple manufacturers store their products.

• Collaborative transport from the collaborative warehouse will deliver to city hubs and regional consolidation centres.

• Warehouse locations on the edge of cities will be reshaped to function as hubs where cross-docking will take place for final distribution.

• Non-urban areas will have regional consolidation centres in which products will be cross-docked for final distribution.

• Final distribution to stores, pick-up points and homes in urban and non-urban areas will take place via consolidated deliveries using efficient assets.

Source: GCI Capgemini Future Supply Chain 2016 Report

strategy with logistics and supply chain operations should be checked. Companies should also leverage on the information & communication technology in order to ensure superior performance. “Rigorous measuring and monitoring critical operational metrics, such as customer service, responsiveness, costs, utilisation of assets, quality of product and flexibility in operations, would also ensure overall business success,” he adds.

38 • SMART LOGISTICS • MAY 2011

been entirely customised to support the Indian requirements.”

According to Khanna, globally wellknown companies have invested in enabling infrastructure and technology to achieve their supply chain objectives and have achieved leadership positions because of the resulting efficient and effective supply chain management practices. Indian SCM service providers are also evolving rapidly. In the past few years, India has

been witnessing a quick transformation in service providers from being mere movers of material to logistics to supply chain services. As we see truckers moving up into integrated haulers, large Indian companies with huge spends on logistics, are hiving off entire divisions into service providers not only to handle the parent’s logistics, but also the logistics of others, while others are forming joint ventures to leverage skills. “As compared to the 1990s, today, the extended multi-tier structure of supply chains as well as the need for better forecasting, collaborative planning, effective logistics and information sharing is better understood by Indian companies,” adds Khanna.

CHALLENGES IN MOVEMENT THROUGH THESE MODELS In its quest for ideal supply chain models, there are several challenges that the industry faces. Aiyar explains, “The current transportation is predominantly skewed towards trucking. Today, trucking has challenges with availability of qualified drivers. The arm’s length partnership with transporters ensures that trucks become unusually short even with a slight increase in market prices (as the transportation capacity gets diverted). Further, integrated multimodal transportation is yet to take off.”

Khanna opines the major challenges that the logistics and SCM practices face in India are related to: • Integrating the supply chain • Adopting a supply chain network within a firm with other functions • Evolution of logistics solution providers • Sharing real-time demand data across partners to ensure demand visibility in the supply chain • Resistance to change within and outside the firms • Aligning supply chain partners to common objectives • Openness of partners to technology adoption standardising technology across them.

Khanna says, “As the industry progresses, some of these capabilities will become an entry requirement for those seeking to compete. Established firms have an advantage here as they are likely to continue benefitting from their pioneering efforts and will seek further differentiation.”

The challenge is the management of multiple handling, claims Anand Balkrishna,

Head BD – SCM, Gati. “Unless roll cages & unitisation are developed, the multiple handling of goods, which is unavoidable, will continue to result in damages & shrinkages,” he avers.

NEED FOR IDEAL SUPPLY CHAIN MODEL With many innovations being introduced to increase the efficiency and reduce the downtime, there is a dire need for companies to use a renewed or new supply chain model that suits their business. Also, with a constant change in the market dynamics, companies need to continuously work on how to use innovations in their existing models.

“There is a need for constant innovation.

Today’s supply chain needs to adapt itself to the external environment. With major calamities such as the disaster in Japan, the political instability in the Arab world and inflation staring at us in India, the pressure on supply chains to deliver has compounded significantly,” avers Aiyar.

Summing Aiyar’s thoughts, Khanna opines that an ideal supply chain should be one which can align with the business model and achieve the targeted objectives of the business. The flexibility of the supply chain model is also important to keep a check on costs.

Sharing his ideas on working around an existing supply chain model, Balkrishna avers, “Using the Hub and Spoke model is inevitable. However, proactive inventory demand forecast from the consumption centre to the supply centre is the iterative exercise which can improve the efficiencies of costs fulfilment. A lean inhouse supply chain team and employing a 3PL is another strategy to get advantage on capex outlay, opex and establishing long-term efficiency drivers.”

DESIGNING THE BEST FIT So according to the type of business, the models can be worked upon to give the best outcome. It is time for the Indian logistics industry to come forward and innovate. They need to follow supply chain models that are driven by reliability, responsiveness, scalability, flexibility and costs.

According to Khanna, when designing an effective supply chain model, the following factors should be taken into consideration: Building an efficient backend: The key to building an effective supply chain lies

in building an efficient backend – the ability to deliver the cargo to the right place at the right time, the location of warehouses, mode of transportation, cost of delivery, leveraging technology, optimising processes – all of it, play a role in building it. For example, Blue Dart has been the only Indian air express company that has invested extensively in technology infrastructure to create differentiated delivery capabilities, quality services and customised solutions for the customer. Offering services like tracking the status update of shipments online, receiving updates on mobile, Blue Dart’s technology is designed to enhance the reliability of its operations & process efficiency and add value to the customer through time & cost savings. Recently, Blue Dart introduced two robust customer-centric programmes – first choice & net promoter approach (NPA). First choice follows DMAIC (Define, Measures, Analyse, Improve and Control) a process, which helps resolve an enduring problem systematically, while NPA aims at gauging customers’ loyalty & delivers a net promoter score, which is an international benchmark for customer advocacy.

Coordination & collaboration: A high degree of coordination and collaboration is essential and can be the difference between profitability and loss. From the very basic communication to understanding the technology used to track and deliver cargo, effective coordination and collaboration can play a crucial role in determining the leader from the also-rans.

For example, Blue Dart and DHL have an X-BU initiative that aims to ‘collaborate and simplify’ customers’ lives.

Building flexibility: In today’s business environment, there are a lot of uncertainties – variations in demand & supply, natural and manmade disasters & technology and equipment malfunctions.

It is critical for a supply chain to factor in these risks, be flexible to adapt to the changed circumstances and agile to respond to the changes. This calls for a risk mitigation plan, which if in place, can help reduce downtime and ensure that the supply chain gets back to business at the earliest.

Infrastructure: According to Khanna, the Golden Quadrilateral Project, a planned network of divided four-lane highways to connect all its major cities, is a good start, along with the East-West and North-South

corridors. This will enable a significant increase in inbound and outbound cargo movement. There are plans to develop world-class airports and seaports; facilities at airports with airside and city side access allowing simultaneous docking of multiple vehicles for speedy loading/unloading; parking bays for aircraft at close proximity to operations facilities to enable rapid transfer/loading of shipments; reduction in traffic congestion to allow for punctuality and reduced fuel consumption and costs.

All these and more constructive efforts will provide the much needed support that this sector requires to fully realise its potential.

Policies: The implementation of the proposed uniform Goods & Service Tax (GST) regime may see a shift of trend in the movement of goods. It will increase in tax burden both, on the procurement as well as distribution side. Also, better understanding on the government’s part about the role played by logistics in order to give it an industry status and less cumbersome regulatory requirements of ST/Octroi/Customs will add to a smoother SCM model.

INNOVATION: A DRIVER TO SUCCESS Keeping in mind the supply chain drivers, the industry must look at how to adapt to the dynamic Indian markets. This booming industry needs to innovate and come out with new solutions rather than following the already existing models and practices. As Balkrishna rightly says, “People (vocational trained), technology (adaptive to environment), regulatory (smoothen the flow through), innovation (budget for R&D & new methods) and right buying (optimum costs of logistics) play a vital role while developing a supply chain model.” These will be the growth drivers in the future, which will help the logistics industry capture one of the most dynamic markets – India.

Also, as changes occur and innovations are incorporated, addressing all the challenges and coming out with out-ofbox solutions will require new ways of working, new tool sets and thus new supply chain management capabilities.

The supply chain managers will need new capabilities to understand the potential of innovation. The mindset regarding the current management capabilities needs to be changed in order to realise the vision of the future.

MAY 2011 • SMART LOGISTICS • 39

SL EXCLUSIVE

SUPPLY CHAIN TRANSFORMATIONS

Today, supply chains are grappling with multiple challenges put forth by globalised markets, diverse operations, pricing pressures, increased customer expectations, fuel cost spikes, tightened lines of credit, shrinking supplier bases and exposure to outsourcing. To tackle these and make the supply chain more adaptive to new product launches in all its variants, companies are looking up to supply chain transformations that can help them metamorphose into the most evolved version of the existing form.

SUMEDHA MAHOREY THE world is changing and so are the dynamics of the supply chain. Today, with options, such as real-time tracking, already in the hands of the end customer, manufacturers are on the look out for newer and faster solutions that can enable them to stand out in the cutthroat competitive market full of global players and reach the customer in the blink of an eye.

With this in the background, supply chains the world over have witnessed many innovations, permutations & combinations that have worked wonders not only for the supply chains, but also the end customer. This evolution has resulted in supply chains adopting newer, more efficient and apt processes for the supply chain that suits the environment in which the company is operating – ideally metamorphosing its processes into a new version altogether.

TRANSFORM TO LEAD THE GAME In the present day and age, supply chain transformations have become a strategic

40 • SMART LOGISTICS • MAY 2011

necessity for every business. S Sridharan, MD, TAKE Solutions, avers, “The world is becoming increasingly dynamic & competitive and business executives are expecting supply chains to deliver more than just efficiency. They know that there can be no improvement without sustained change. That is why they are relying on supply chain organisations to deliver innovative strategies and business models to help the company grow.”

But from where does the need to transform arise? Sridharan highlights, “Rapidly changing customer needs, globalisation, evolving competitive/ regulatory environments and emerging technologies have once again put the spotlight on how supply chains power business process innovation in response to evolving business needs.

These transformations drive increased profitability, greater shareholder value and more effective management of the extended enterprise.”

Even 3PL service providers have jumped the bandwagon. Elaborating on

this emerging trend, Sougato Shome, GM – Supply Chain Management, Future Supply Chain Solutions, asserts, “Now, 3PL providers are being involved in the process of planning. Earlier, they were only involved as a transport or warehouse service provider. This trend has become a reality as companies are increasing their base in terms of global connectivity. Big multinationals that are selling across the country need a much wider network.

These companies find it convenient to outsource the all-India planning to a 3PL solution provider. That is one reason why solution providers today are transforming and getting into the mode of being a onestop solution provider.”

TRANSFORM, BUT HOW? In a supply chain, people, processes, technology and continuous improvement make all the difference. Sridharan explains, “The steps and path-to-success for any supply chain largely depend on the business and the environment that it operates in. However, the following steps

Illustration By Sanjay Dalvi

are recommended as a rule of thumb – identify business goals and objectives, develop and refine your competitive framework, review how your market strategy and customer service influence your competitive standing, align supply chain process and business objectives, deploy effective supply chain technology to integrate supply chain management and information technology initiatives, consider outcome-oriented outsourcing and continuously measure progress.”

Shome, on the other hand, suggests that 3PL providers need to start afresh and get to the basics before transforming into an end-to-end solution provider. He says, “Once a company decides that it has to become an end-to-end solution provider, it needs to define the space in which it will function – bulk, cement, chemical are some of the examples.

The next step is alignment and process definition. The company needs to align every entity of the supply chain to the new process – employees, operations, warehousing and transportation. Gradually then, the company increases its reach and gets into the mode of being not only a service provider, but also a complete solutions provider.”

Issues with alignment The toughest challenge during the transformation lies in changing the culture of an organisation. Amit Maheshwari, CEO & Founder, Softlink Logistics Systems, elaborates, “Tackling the organisation’s culture effectively is one of the most

important actions that ensures successful transformation. Until the organisational culture, as a whole, is not adopted, supply chain transformation would not result into huge benefits. Thus, organisations need to consider the various entities within the organisation. Companies work on one axis, logistics works on another, while manufacturing works separately. Marketing and sales are also working on different tangents. The company needs to bring all these under one umbrella while including suppliers as well as the logistics service providers in the change process.”

“Now, the time has come when companies do not consider logistics service providers as vendors, rather they think of them as business partners.

Hence, they have also become part of the transformation process,” he adds.

Driving supply chain transformation Aligning a company to perform a seamless workflow is not an easy task. Maheshwari articulates, “There are three vectors along which companies continue to pursue alignment – aligning supply chain and brand strategies, aligning supply to demand, and aligning the supply chain objectives & the trading-partners’ objectives. In this backdrop, every new product introduction brings in an opportunity for supply chain transformation. Some companies, especially the ones focussing on designing products while outsourcing manufacturing, have benefitted from building exclusive supply chains to make their new products win. The learnings and the experiences

from the new supply chain are channelled into the existing one to bring about quantum improvements across the board.

Other companies have leveraged on the existing relationships and processes to drive supply chain transformation.”

“The bottom line is that supply chain planning and execution need to be guided by ‘line-of-sight’ metrics and key performance indicators. The key to success lies in developing an integrated transformation programme that addresses progress in terms of alignment along all the three vectors mentioned,” he adds.

WITH CHANGES COME CHALLENGES The basic problem that the Indian industry faces today is lack of awareness of the supply chain management concept.

PRS Sarma, Professor – Global Logistics & Supply Chain Management, GITAM School of International Business, GITAM University, points out, “Earlier, supply chain was not our core competency.

But today, supply chain is nothing but business. The biggest challenge that leads to a transformation is the survival for existence. Today, we are not talking about competitive markets; we are talking about hyper competitive markets, where companies do not have the time to think that changes can be done tomorrow.

The plans need to be completed day before yesterday so that the process is completed yesterday. This brings in Michael Porter’s statement, ‘This age is of time to market’. Thus, the need of the

MAY 2011 • SMART LOGISTICS • 41

Supply chain transformations, continued

hour is a completely integrated process that brings the time to market equivalent to the blink of an eye.”

The environment in which the company operates also poses challenges.

According to Sridharan, most supply chain transformation projects involve multiple trading partners, multiple stakeholders, multiple objectives, multiple criteria and multisite operations. The biggest risk for such a process comes in the form of uncalibrated expectations. A complete alignment of objectives and processes across multiple organisations is difficult to achieve in a short time, and is certainly not possible solely by adopting technology. Supply chain transformation is a process that requires close monitoring of results and frequent calibration of processes to drive sustainable results.

Another risk for such projects comes in the form of managers facing difficulties in understanding and visualising the effect of such projects on the way their company works and how it improves the reliability and responsiveness of their supply chains.

This affects the way planning is followed through execution to result.

TECHNOLOGY, AS THE FACILITATOR The focus of most transformation efforts are on value creation & efficiency gains and technology plays the role of a key enabler of supply chain agility and innovation.

Sridharan comments, “Today’s business models increasingly leverage collaborative supply chain environments facilitated by industry best practices and information technology. For instance, business process management technologies are enabling multi-enterprise collaboration.” But here also lie difficulties. He elaborates, “The most important challenge is to learn to look at technology as a means and not as a goal. Businesses tend to adapt their processes to technology constraints – mainly to preserve out-of-the-box solutions. The trick lies in recognising that businesses can benefit immensely from their own best practices. Instead of force-fitting their processes to the existing functionality offered by off-the-shelf enterprise systems, businesses should be looking for technology options that enable winning business processes.”

Adopting a technology has thus become imperative in the changing global market. But the adoption of this technology is completely dependent on the new process definitions. Maheshwari

42 • SMART LOGISTICS • MAY 2011

asserts, “It is very important to ensure that the new process can be adhered to. Once that is done, a company can shortlist technology to support the whole transformation through integration – suppliers, logistics service providers, freight forwarders, transporters, warehouses, manufacturers, marketing and sales.”

Here also, it needs to be considered that different companies have different requirements and there is no technology that can completely suffice the requirements of each and every industry.

Maheshwari adds, “No off-the-shelf product (technology) can be directly adopted as even in the same industry, the culture differs. In India, a lot of foreign technologies have been adopted, which disrupts the process rather than offering benefits. This happens as the culture of our country is entirely different from the business culture of the country of the products’ origin.”

EXAMPLES GALORE Discussing transformations at Future Supply Chain Solutions, Sougata explains, “For us, getting into racks, warehouse management and automation has been a major change factor. Presently, we have fully racked warehouses and WMS, which has brought about a sea change in the way we function today. To bring about this change, we brainstormed on the processes, its set up, the technical teams needed to understand how the processes should be implemented, etc. It was a concerted effort towards planning the structure of the WMS and we are still working with solution providers to ascertain what would work the best.”

Another example has been put forth by TAKE Solution. Sharing a case, Sridharan explains, “A top-tier global oilfield services company was able to improve days’ payables outstanding and the cash conversion cycle using supplier collaboration and procure-topay automation. Their supply chain was initially characterised by material delivery delays from suppliers, late payments, unfavourable days purchases outstanding, manual processing of transactions, lack of end-to-end visibility & control of processes and high cost of operations.

The supply chain transformation goal was to enable robust supplier collaboration and process measurement capabilities for procurement groups in product centres located across the globe, and to enable

real-time visibility to order fulfilment and invoice processing.”

He adds, “This meant that they needed to improve the efficiency and profitability of supplier relationships by automating, monitoring and controlling each step of their procurement process – from requisition to payment. Using our solutions, their buyers embarked on creating a partner ecosystem that simplifies sharing of information, matching each shipment to its order, enforcing compliance with ordering and shipping policies and clearly linking receipts to invoiced items and payments.”

Sharing the success of the oilfield services company, Sridharan asserts, “On the successful completion of the supply chain transformation, the company has been able to automate 89 per cent of its spend, collaborate with 800+ suppliers in real-time, realise savings of over $5 per supplier invoice, achieve invoice processing first pass accuracy yield greater than 98 per cent, eliminate redundant processes and dual data entry, improve process efficiency and cut down procurement & communication costs.”

Discussing some of the successful and well-known examples of supply chain transformations, Sarma avers, “Look at Dabur India, which used to distribute affordable medicines in the beginning.

Today, it has extended its supply chain.

Another case is that of Dell. The company has transformed and brought the concept of extended enterprise, i.e. the direct selling concept to the customer.”

ACCRUING THE BENEFITS Supply chain transformation initiatives seek to bring about measurable improvements related to reliability, responsiveness and costs. Further, the unseen value proposition of such transformation initiatives lies in improving visibility, accountability, transparency, flexibility and confidence believes Sridharan.

Although these transformations come with a price tag, its benefits can be accrued in the long run. Sarma affirms, “From a long-term perspective, this transformation will definitely benefit an organisation and can be shared by the customer at the end. Transformation thus, needs continuous implementation, monitoring and support.” Only then can the cost benefits be transferred to the end customer and the ultimate aim to reach a leader’s position be achieved.

SUPPLY CHAIN EVOLUTION INSPIRATIONAL BENCHMARKS

TOP 10 INNOVATIONS OF ALL TIME Supply chain management is a crucial element to any competitive strategy. In the history of supply chain management, a few innovations had an unprecedented and deep impact on the way business happens today. Take a look at some of the top innovations of all times, which have changed the dynamics of supply chains universally.

NO.1: THE TOYOTA PRODUCTION SYSTEM

NO. 4: ECONOMIC ORDER QUANTITY (EOQ)

NO. 7: THE FEDEX TRACKING SYSTEM

When James Womack and several coauthors wrote ‘The Machine that Changed the World’ in 1990, it was of course not a Toyota car that had such an impact, but rather the Toyota Production System (TPS) that was the foundation of the company’s dramatic success across the globe. The Toyota Production System is an integrated socio-technical system that comprises its management philosophy and practices.

An inventory-related equation, which determines the optimum order quantity that a company should hold in its inventory given a set cost of production, demand rate and other variables. It helps minimise variable inventory costs. The original concept of the equation is credited to Ford Whitman Harris, a Westinghouse engineer, from an article in 1913, but it was a much later article in the Harvard Business Review in 1934 by RH Wilson that made EOQ mainstream. The formula forms the basis for supply chain decision-making in this era.

FedEx, in the mid-1980s, developed a new computerised tracking system that provided near real-time information about package delivery. The system drove the idea that ‘information was as important as the package itself,’ and is the foundation of current supply chain visibility systems and concepts.

NO. 2: P&G’S CONTINUOUS REPLENISHMENT Until 1987, order patterns in the consumer goods supply chain were totally dependent on whatever the manufacturer sales person and retail buyer decided between them.

That is until Procter & Gamble bought a mainframe application from IBM for ‘continuous replenishment’, re-wrote it for consumer goods to retail, and dramatically changed the entire value chain by driving orders based on DC withdrawals and sales data.

NO. 3: THE OCEAN SHIPPING CONTAINER Until the mid-1950s, there was no standard way to ship products on ocean carriers and most were shipped on whatever container or platform the producing company deemed best. The result was terribly inefficient handling on both sides of the equation, poor space utilisation and high logistics costs.

Enter Malcom McLean, who invented the standard steel shipping container, first implemented in 1956 at the New Jersey port. Thus, started the explosion in global trade.

NO. 5: THE FORD ASSEMBLY LINE Henry Ford got the idea for the assembly line approach from the flow systems of meat packing operations in the Midwest, but it was his adoption of the production approach with a continuously moving line for Model T’s in 1913 that took manufacturing to new levels. Total time of assembly for a single car using the production line fell from 12.5 labour hours to 93 labour minutes, making cars affordable for the masses, changing the supply chain and the society.

NO. 6: THE UNIVERSAL PRODUCT CODE In 1970, Logicon wrote a standard for what came to be known as the Universal Product Code (UPC) to identify via a bar code a specific SKU, an effort that was finalised a few years later by George Laurer. UPC was first implemented in 1974 at a Marsh’s supermarket in Troy. The invention triggered the auto ID movement, forever changing the supply chain practice and information flow.

NO. 8: DISTRIBUTION REQUIREMENTS PLANNING (DRP) In late 1970s, Andre Martin found that manufacturing and distribution managers, could never get inventory questions right. Realising this, Martin built the first computerised DRP system, which resulted in a book that created the software category of DRP. This was the start of supply chain planning software industry.

NO. 9: 3M’S TRANSPORTATION LOAD CONTROL CENTRE In 1982, 3M, had to leave transportation decisions to plant and distribution centres. To centralise transportation planning for network synergies, 3M took mainframe software by Schneider National and modified it to be workable from a shippers’ perspective. Ship sites called in planned shipments; carriers and routings were phoned back. The load control centre is now a standard practice today.

NO. 10: TAYLORISM In 1880s, Frederick Taylor invented the concept of using time studies on the shop floor. Thus, emerged the notion of ‘standard time’ for getting specific tasks done.

MAY 2011 • SMART LOGISTICS • 43

SMART SUPPLY CHAIN

PARLE AGRO

SATISFYING The CRAVE For Fresh ‘n’ Juicy Scorching heat and tingling taste buds are some of the many reasons that often makes one crave for a chilled beverage or a packet of chips. Satisfying this crave all over India is a major challenge for companies and their supply chains. Designing a supply chain that best fits the vision of having their multiple products on the shelf when needed, the supply chain at Parle Agro has left a mark in the industry right from its first successful venture – Frooti. An insight...

SUMEDHA MAHOREY A small tetra pack, which has changed the way the beverage market functions in India right from its launch in 1985, has caught the fancy of many. Right from long distance train travellers to children’s fairs, this brand has grown with most of us from being our favourite childhood drink to India’s ‘Most Trusted Fruit Beverage

44 • SMART LOGISTICS • MAY 2011

Brand’. Frooti was also the first to bring the tetra pack concept to India. Today, living its fresh ‘n’ juicy anthem, Frooti is a household name. In all its playfulness and naiveness, the brand has gained acceptance with the young & old, time and again.

With Frooti as its flagship brand, Parle

Agro has established and expanded its presence in the business of refreshing markets with new categories through continuous innovation. With products like Saint Juice, Appy Fizz & LMN already in its kitty, the company has recently forayed into the snacks segment with Hippo and Hippo Round Round. The company has

its huge distribution network, the supply chain of Parle Agro has managed to handle the three products segments – beverages, confectionery and snacks – in an effective manner.

Young and evolving in its approach, Parle Agro’s supply chain is open to innovation and fast adaptability. Taking up the task of distributing one product after another, with unique requirements, shapes and design, Parle Agro’s supply chain has gained trust from the market for timely delivery & replenishment.

Parle Agro Products Profile BEVERAGES

FOODS

• • • • • •

Confectionery • Softease Mithai • ButterCup Softease

Mango Frooti Saint Juice Appy Fizz Grappo Fizz Appy LMN

Water

Snacks

Bailley

• Hippo Munchies • Hippo Round Round in different flavours – Punjabi Da Pickle, Shillong Noodle Masala, Goan Butter Garlic, Gujarati Mango Chutney, Firangi Cheese n Spice, Tanjore Tangy Sambhar

ATTAINING SUPPLY CHAIN EFFICIENCIES

measures include, configuring the supply chain to support innovation and speed to market, deeper penetration into rural markets by implementing the Hub & Spoke Model, timely replenishment and maintaining good freshness index with regards to its stocks. Commenting on the company’s focus on deeper penetration of products, Dharmendra Singh, National Sales Manager, Parle Agro, highlights,

also marked its strong presence in the packaged water segment with Bailley. In the confectionery products portfolio, Parle Agro has Softease Mithai and ButterCup Softease.

Parle Agro believes in catering to the customer’s preferences and their taste buds through originality & innovation. The company’s mission statement says it all, “We will be the leaders in our business by maintaining high quality, introducing new & innovative products, reaching every part of India, remaining customer-centric and constantly upgrading our knowledge & skills.” A major pillar that has made the company realise its vision statement is the supply chain division of Parle Agro.

Catering to the needs of one & all, with

Photo By Joshua Navalkar

Photo By Joshua Navalkar

At Parle Agro, the supply chain acts as the pillar that not only boosts brand value but also supports the effective production process. Highlighting the vision & mission of the supply chain, Jayakrishnan Nair, GM – Purchase, Parle Agro, says, “The thought is to be more effective and efficient in the supply chain. Our road map talks of establishing effectiveness and efficiency as two strong pillars at every stage of the process.” The company has taken many steps to create a seamless supply chain for all its products. These

The warehouse at Patalganga site

MAY 2011 • SMART LOGISTICS • 45

Parle agro, continued

Timely replenishment of the entire chain, which includes ensuring that the right product is available in the factory for dispatch, pushing it to the CFA level and then, to the distributor’s end, and, at the same time, ensuring that replenishment is effectively carried out are the factors determining Hippo’s success.

JAYAKRISHNAN NAIR, GENERAL MANAGER – PURCHASE, PARLE AGRO “Through Hub & Spoke model, the penetration of Parle Agro products has increased to Tier VI towns in states such as Madhya Pradesh and Chhattisgarh. Thus, the reach of the product has increased to far-fledged areas.”

The company has been successful in achieving distribution efficiencies by way of primary distribution and efficient secondary dispatches. In primary dispatches, the company has a fixed set up of contracted transporters, who ensure that distribution is done in an efficient manner. While for secondary dispatches, the company has common clearing & forwarding agents (CFAs) for beverages and snacks. Having common CFAs has helped the company in effectively managing the space cost among other expenses. The company maintains an optimum inventory holding for beverages averaging around 18 days each for plant and depots.

Role of CFAs: One of the CFAs that Parle Agro has contracted for the Mumbai region includes Lakshya Global Logistics.

The company has been providing warehousing and logistics infrastructure to Parle Agro through its site at Panvel since the last three years. Highlighting its supportive role, Anupkumar Aras, GM – Logistics & Supply Chain Management, Lakshya Global Logistics, explains, “We provide warehousing, manpower and infrastructure support (computers, internet connection and electricity backup) to the company. The stock is dispatched from Patalganga (company site), we warehouse it, match up the inventories and according to the order flow, we dispatch the stocks to various distributors through secondary channel of transportation.”

“Parle Agro tracks the inventory level at our warehouse and replenishes it whenever the level goes down,” he adds.

Commenting on the collaboration for three successive years, Aras says, “Although we have faced recession and pressure due to increasing petrol prices, we have stuck to the initial agreement that was signed between the two companies. We

46 • SMART LOGISTICS • MAY 2011

also have the best inventory management in place. The material in & out and the balance inventory in the warehouse are managed completely at our end.

Whatever be Parle Agro’s daily flow, our motto is to execute all the order flows.

But if there are any credit limit issues, we get in touch with the company and solve it. Our trained manpower is aptly able to satisfy the requirements that they put in.”

Other than having the right CFA, the company also has an inventory tracking system in place to control ageing and avoid revenue loss on account of expiry.

Apart from the above, some of the other best practices include: Cost efficiencies: For any supply chain, attaining cost efficiency is a must. For this, the company has devised a sourcing matrix.

This matrix helps the company decide on strategic locations for manufacturing.

CFA/depot locations are also chosen considering optimum cost and services to the market requirement.

Transportation: Parle Agro has done various simulations to increase the truck

load factor. Cost optimisation has been achieved through the right combination of SKUs for vehicles to avoid underutilisation and ensuring the right vehicle type for the optimisation of container loads in the food division.

New launches: Elaborating on the plans in place for new product launches, Nair avers, “We have to have plans in place before new product launches. This includes planning for space requirements, transportation modifications and storage planning, especially for snacks, which are in bulk.” Ganesh Subramanian, Manager – Logistics, Parle Agro, adds, “In the case of snacks, the type of distribution, vehicle and the movement style changes and containers of different capacities come into the scene.”

The USP of Parle Agro’s supply chain lies in the effective distribution planning of its CFAs. The company follows OTIF i.e., the on time-in full concept, for distribution to the last mile. Subramanian explains, “Our USP lies in timely replenishment.

We follow a monthly forecast, which has been divided into weekly forecasts.

So, we have a focussed approach to the supply chain. Also, our plants are placed such that every unit has 4-5 depots in its region.” For rural customers, the distribution takes place using the ‘Hub & Spoke Model’, he adds.

LOGISTICS BEST PRACTICES Some of the best practices adopted at

Photo By Joshua Navalkar

Forklift operation at the Patalganga site ensures that stock is handled with safety in mind.

SUSTAINABILITY IS THE MANTRA Some of the green initiatives taken at Parle Agro as part of its best practices include use of glass bottles, which are environment-friendly as against PET, use of plastic crates against corrugated boxes on a rotation basis, use of tetrapacks, which are more eco-friendly in terms of re-usage at various levels, viz., decorative stands, in paper (books), etc., waste management programmes, linkages with recyclers and establishing a link between consumers – waste pickers – scrap dealers – recyclers.

Photo By Joshua Navalkar

Parle Agro include efficient forecasting and production planning in which monthly plans are made for Raw & Packing Material planning and weekly production plans are made considering the requirements and inventories at depots/factories. The CFA and depot management practices adopted at Parle Agro boasts of inventory control, FIFO, efficient storage & movement, storage of finished goods in pallets/Tarfelt sheets, following of stacking norms, direct fortnightly reporting of CFA on product ageing and dispatch tracking

by CFA on secondary movements, etc.

The proximity of depots to the business area has also helped the company ensure timely replenishment of stocks. To ensure seamless transportation, the company has entered into agreements with good transporters. Periodic evaluation on the performance of deliveries is also done by the company. The supply chain network of Parle Agro has been designed considering the market needs. In the beverage market, reach up to ‘Tier VI population’ is required. Hence, the network has been devised with multiple CFAs within a state.

While in the snacks segment, considering the reach up to main towns the network has been modified.

Apart from this, Parle Agro has reverse logistics in place, which ensures the reduction of dependency on market vehicles. This is achieved through long association with transporters having a dedicated fleet of attached vehicles for specific routes. Also, the primary movement of mango pulp from vendor to factory is aligned in such a way that the same vehicles carry back empty drums.

Lakshya Global Logistics’ warehouse (Parle Agro’s logistics solution provider) at Panvel.

TECHNOLOGY AS THE FACILITATOR To ensure that an appropriate cover is given to each and every input that goes into the manufacturing process, Parle Agro has implemented SAP and material resource planning (MRP) system.

According to Nair, these systems are wellestablished for beverages. However, the technology for the snacks division is yet to be established. Nair adds, “At present, we are trying to get into barcoding. We have a lot of barcoding vendors, but we are undecided on the use of this technology because of the recurring cost factor.”

MEETING DEMAND PEAKS According to Nair, in the beverage segment, the company faces peak season from February to June; whereas in the snacks segment, the company faces a surge in demand during the festive season. Elaborating on the measures to tackle this increased demand from the supply chain point of view, Subramanian says, “In beverages, we ensure timeliness in the delivery schedules. During the peak season, there is a special coordinated effort to reach the shelf on time.

We ensure that there is communication between the Factory-CFADistributor-Retailer. Until and unless there is no effective communication, seamless flow of finished goods cannot be ensured.”

For snacks, especially during the peak season the primary supply chain has to be geared up as the gift packs need to reach CFAs within the set deadlines.

A CALL FOR EFFICIENT SYSTEMS Though Parle Agro has achieved a seamless supply chain, cost pressures and the need for better planning on the part of manufacturing as well as the supply chain has generated a void that needs to be filled at the earliest. Suggesting a solution, Nair highlights, “We need to adopt a good forecasting model. In this era, in which there are many ups & downs, operations occur from multi-manufacturing locations.

We have to cater to a huge market for which a good forecasting tool is required.

This in turn will ensure perfect planning, on-time market servicing and will avoid stock outs, etc. At the end of the day, the market does not work on compromises; we have to satisfy the demand.”

“The aim is to be more effective & efficient in the supply chain,” he adds.

YOUNG AND FAST LEARNERS The supply chain at Parle Agro has definitely evolved through the experiences learnt from multiple product additions as well as success of brands such as Frooti and Appy Classic, which have established themselves as market leaders in their respective categories. Increased efforts being put in by the young supply chain team to ensure timely presence on the shelf for all its products certainly marks the emergence of a fresh ‘n’ juicy giant supply chain, which competitors would find tough to challenge.

MAY 2011 • SMART LOGISTICS • 47

CASE STUDY

INDIAN STEEL CORPORATION

EXEMPLIFYING OPTIMAL UTILISATION OF

MULTIMODAL TRANSPORTATION While most of India’s supply chain activities take place through rail and road, its time to utilise the 7500-km coastline the country has been blessed with. This not only ensures timely delivery of goods but also helps in reducing logistics costs while being environment-friendly and green.

Capitalising on this opportunity, Indian Steel Corporation (ISC) has managed to optimally use multimodal transportation to ensure a seamless supply chain.

SUDHIR MUDDANA THE Indian logistics industry has been constantly striving to find ways to reduce costs, increase its customer base, reach and satisfaction. Fortunately, India has well-connected and vast road & rail networks, which are helping companies achieve the same.

Most companies are utilising these road & rail networks to the core for transportation of their goods within the country, and are yet to tap the potential that India’s 7,500-km coastline has to offer

48 • SMART LOGISTICS • MAY 2011

for goods transportation. The sea also offers companies the chance to reduce their impact on the environment. In such a scenario, where companies are struggling to enhance their efficiency through newer techniques, Indian Steel Corporation (ISC), along with Shreyas Relay Systems (SRS) as its logistics partner, has managed to successfully make optimal use of India’s long coastline for its benefit.

Being a pioneer in the Indian steel industry, ISC believes in manufacturing

and delivering quality steel products to their customers. However, customer satisfaction is not restricted to ensuring that the product is of optimal quality, it also includes ensuring that the product reaches the customer’s door at the right time regardless of the circumstance.

With a vision to carry out efficient, cost-effective and green logistics, ISC, along with SRS, has designed a seamless supply chain by utilising all the modes of transportation. Using the Hub and Spoke

optimise the benefits of the post-GST scenario. By using premium SRS services, and by enabling coastal movement for distribution in Kerala and Tamil Nadu, ISC gets the benefits of eco-friendly logistics i.e. green logistics as most of its transportation is done via the sea.”

OUTWITTING COMPETITORS

model and multimodal transportation, ISC has managed to ensure timely delivery of its steel products to all its customers, irrespective of the location.

While manufacturers compete with each other in terms of quality and variety of products that they have to offer, they also face major competition when it comes to their supply chains as the delivery of those products depend on it. Also, in an industry like steel, where there are price fluctuations at small intervals, the role of the supply chain gets even more crucial as delays in delivery can cause major losses. Agarwal explains, “Our plant is situated in Kutch, close to Kandla Port.

It also has close proximity to Mundra Port. This has helped us utilise the sea route to our advantage and ensure timely delivery of our product to the customer’s doorstep.”

“Our industry witnesses major price fluctuations and delay in delivery can result in huge losses for us. For example, if the price of steel today is `100 per metric tonne, it is possible that within a week it falls to `80 per metric tonne. So, if the timeframe is not met, there will be a loss of `20 per metric tonne,” Agarwal adds.

Justifying what differentiates ISC from

its competitors, Kiran Nandre, General Manager – Marketing, SRS, says, “The timely delivery of the product to the customer’s doorstep is a very important aspect that differentiates ISC from its competitors and gives it an upper hand in the steel industry. This is done by leveraging on the strategic location of the plant. Thus, by using the coastal route, ISC has a major cost advantage along with on-time delivery of its products, which gives it the leading position in the market.”

USP OF SUPPLY CHAIN What makes ISC’s supply chain stand out is its ability to optimally use multimodal transport for transporting products domestically as well as internationally.

This has a major contribution to what the industry calls the next step to improving logistics – Going Green. Agarwal says, “When you compare road transport and coastal shipment, the latter is more viable for us as it is cost-effective and has offered a major boost to the dispatch rate of our products. The reason for this is that we can load up to 28 MT of container shipment through coastal transport, but when it comes to road, there are several restrictions.”

Stating the USP of its supply chain, S Varadarajan, CEO, SRS adds, “The USP of ISC’s supply chain is that it prefers maximum shipments by using multimodal transport. Be it rail, road or sea, multimodal

BOOSTING BRAND VALUE OF ISC PRODUCTS ISC believes in the core values of relationship, innovation, teamwork and excellence. This applies not only to its manufacturing units but also to its supply chain. Explaining the crucial role of its efficient supply chain in boosting the brand value of ISC’s products, Aditya Agarwal, Manager – Exports, ISC, says, “The SCM has helped us reduce the cost of inventory. It has played a big role in assisting our growth value. We have experienced a sales growth from last year to this year due to SCM efficiency.

This has been done by using multimodal transport system, such as sea and rail, besides road. In addition, the use of the Hub and Spoke model along with multimodal transportation will help us

The steel is packed with corrugated material, which is covered with one layer of galvanising sheet and is then covered by a plastic material.

MAY 2011 • SMART LOGISTICS • 49

Indian Steel Corporation, continued

transport is an integral part of ISC’s supply chain model. In addition, the eco-friendly and green logistics factors add to the USP as it is a value-added benefit, especially when it comes to CO2 emissions.”

WHY OPT FOR MULTIMODAL TRANSPORTATION? While most steel companies transport their products via rail, ISC uses the sea route as it helps them avert a situation where they could incur a loss that could be caused due to delays in the train schedule. Varadarajan explains that if a company wants to use rail, the major drawback is that it cannot depend on train only.

Also, presently, there is only one player that transports steel by rail and that is Concor. Since it is a governmentowned container train provider, there is no certainty on when they will provide the train for transport. Varadarajan says, “You cannot tell the customer that the cargo will reach him only when a train is available. This is where transportation by sea benefits ISC. While using the sea, there are fixed vessels and fixed windows for these vessels. Therefore, we can commit the accurate time of delivery to our customers. We can give them, at any time, the detail about where their shipment has reached and mention the exact date of delivery. Thus, our distribution model allows us to analyse and work around the different modes of transport and see which ones suit the best so that the delivery reaches the destination on time.

Hence, if the destination is internal, road is used in that part.”

On ISC’s approach to selection of multimodal transportation, Nandre comments, “At the first level, it is evaluated if the sea-road combination can be used. Then at the next level, it is seen if rail-road combination can be used. Finally, at the third level, the Hub and Spoke model is used. So, by using multimodal transportation and Hub & Spoke model, ISC tries to design and implement its model in such a way so as to ensure minimum locations and multiple distributions.”

So what prompted ISC to use the sea passage for transportation? Agarwal replies, “India is blessed with a long coastal line of about 7,500 km. Situated near the two major ports, we thought ‘why not take advantage of the sea passage?’ All developed countries use the

50 • SMART LOGISTICS • MAY 2011

sea to transport most of their products, whereas we, in India, use only seven per cent. And, if we can contribute to reduce cost, damage and pollution caused along national highways, as a corporate social responsibility, then why not? That’s why, today, we use the coastal line to transport most of our cargo, internationally and domestically.”

Nandre adds that there are a large number of imports and exports that take place in ISC.

the product being sent is secured in the wood pallets.”

In addition to these techniques, ISC also uses the latest and best technology in its supply chain. Nandre explains, “We are using Tata Prima 4028 fleet, which is installed with GPS and is as advanced as the Volvo. Therefore, we maintain real-time information about the location of our fleet at any point of time. We have our own in-house designed software maintaining all the activities.”

USING GLOBAL TECHNIQUES & TECHNOLOGY

THE 3PL WHICH COMPLEMENTS ISC’S BRAND

Apart from the various combinations of modes of transportation used to ensure on-time delivery of its products, ISC also follows a number of global techniques to ensure safety and security. Nandre avers, “Maximum cargo moves in containers.

We are using the ‘latching and choking technique’ from a Europe-based company having a Germanischer Lloyd certification and unique packing systems in the world.

ISC has adopted that process through us (SRS). This has been working well with zero accidents since the date of its inception.”

Explaining the unique packing systems, Agarwal says, “The packing is done in an efficient manner and ensures that no damage or wastage occurs during transportation and handling. The steel is packed with corrugated material, which is covered with one layer of galvanising sheet and is then covered by the plastic material. Also, the age proof of the steel is depicted on the age guard which is present on the packed parcel. In addition, ISC has palletised cargo to ensure that

Along with being a logistics partner, SRS has proved to be ISC’s strategic partner, making sure that it maintains a seamless supply chain for the steel giant. It has managed to complement ISC’s brand name, thereby making it one of the leaders in the market when it comes to on-time delivery of ISC’s quality products.

It has come to a level that there is no doubt in the mind of the customer that a product ordered from ISC will reach them on the date specified, be it under any circumstances. This not only ensures loyalty of the customer towards the brand but also helps it to calculate and specify a date for the delivery of its products to their customers.

In other words, by providing ontime delivery, ISC ensures that not only its customers but even its customer’s customer are happy. Confirming the same, Agarwal says, “We believe that our customers should recognise us as a company that fulfils its commitments on time and our supply chain, having a big role to play, ensures this.”

Tata Prima 4028 fleet laced with GPS is used for transportation

Photo ©DINODIA

LOGISTICS & DOCUMENTATION IN INDIAN PORTS SPECIAL REPORT

AIMING FOR A SYNERGY BETWEEN

HARDWARE & SOFTWARE

An efficient logistics system not only needs an equally efficient and adequate system of hardware infrastructure, but also requires an efficient and seamless organisation of the documentation and payment processes. If the cargo flow, which goes through the ports and the port terminals, and over its connecting roads & railways, is not coupled with efficient documentation and payment procedures, the totality of the logistics process cannot be considered as functioning well. Only if the hardware and software fronts of a logistics system are adequately structured, the logistics system in a country can be considered holistic, adequate and fit to ensure a smooth processing of the cargo flow.

THE last decade has witnessed many innovations on the software front of the logistics system. For instance, various companies and institutions involved with port activities have adopted digitalised systems dedicated to the processing of the ever-increasing amount of documentation, and needed communication & co-ordination. These digitalised electronic systems handle almost-paperless procedures, documentation and payments that are inherently coupled with the movement of cargo through ports.

In order to make communication between the various companies and institutions active in ports digitally possible, a Port Community System (PCS) has been created. PCS enables a port’s stakeholders to digitally exchange data

with each other.

This ensures that the cargo flow passes through the port, and its connecting rail & road infrastructure, without being hindered by the physical presence of officers or staff, with paper documentation, stamps, seals, etc.

The operation of such PCS enhances the effectiveness of the logistics system and the investments made in the hardware infrastructure of that system.

THE BENCHMARK Analytically, one can discern the logistics process through: • The cargo flow • The documentation flow • The payment flow Ideally, a smooth functioning logistics

process will be realised if these three flows function parallel with each other and do not have any practical or physical interference obstructing the flow. The actual practice in the ports of Rotterdam and Amsterdam is close to this ideal situation.

In the ports at Rotterdam and Amsterdam, the PCS is financed and maintained by the port authorities in a 100 per cent independent subsidiary. The neutral status of such a system, which gives the information only to the party for whom it is entitled, is crucial for its functioning. A business environment, along with the working procedures of the main stakeholders concerned with this PCS, has been created. In this environment, the three above discerned processes operate

MAY 2011 • SMART LOGISTICS • 51

Logistics & documentation in Indian ports, continued

almost parallel.

However, in the Dutch logistics systems, there are constraints, which hamper the smooth functioning of the entire system. The main issue with this system is the physical inspection, which still takes place security-wise, in some cases, before cargo can enter the country/the European Union (EU). In an attempt to minimise the adverse effects of a securitywise inspection, the Customs have an advance system of notification in place that will inform the parties involved about which containers will be inspected. This advance system of notification ensures that the containers to be inspected, once discharged at the container terminal, are not taken to the container stack. Instead, they are immediately sent for inspection.

This avoids double handling costs.

Another challenge is the single window coordination of the Customs with other government institutions, such as the veterinarian inspection of the Ministry of Health and approval by the Ministry of Environment. The Customs is the ‘leading partner’ in this process. It ensures that the electronic systems of other public/ government services are more integrated.

Its objective is to minimise the number of hindrances in the logistics flow of goods. The successful operation of the PCS ‘portbase’ was possible because in the Netherlands the Customs has made the electronic filling of documents in the system mandatory.

PORTS AND DOCUMENTATION IN INDIA According to the Indian Maritime Agenda

2010-20, traffic at major ports will grow at a Compounded Annual Growth Rate (CAGR) of 8.03 per cent from 561MT in 2009-10 to 1215MT by 2019-20; whereas the traffic at non-major ports is expected to grow at a CAGR of 16 per cent from the present level of 289MT to 1,270MT in 2019-20.

This scenario demands a synergy between hardware & software in the Indian ports. On the hardware front, the necessary investment to upgrade or extend the actual infrastructure such as port terminals, railways and roads take place.

The Indian Government is considering a special Infrastructure Investment Fund from the fiscal year 2011-12.

On the software front, Customs is connected with other parties in a port through ICEGATE. The ICES system is used by the Indian Customs to handle imports and exports. For the smooth processing of the Customs processes, a new digitalised system, ICES version 1.5 has recently been launched.

The Indian Ports Association (IPA) has launched a newly designed PCS, which will be available for the 13 major ports as well as the non-major ports. In this system, a central post box having messaging facilities, enables stakeholders in a port to establish connect with others. In the central core, the harbour master functions, viz., vessel report, billing of vessel, etc. take place.

Characteristics of the documentation flow The documentation and payments involved with the flow of goods in India is not different from other countries. Within the documentation flow, three main

processes can be discerned. They are: • The shipping line/agent process • The Customs process • The harbour master process The shipping line communicates which cargo is on which vessel entering an Indian port. This is described in the Import General Manifest (IGM). In the ports, the harbour master assesses if the vessel is fit to enter the port. The Customs, on the other hand, assesses, according to the management system applied, if some of the cargo has to be inspected. The goods only enter the country after the cargo gets sanctioned by the port authority and the Customs. During this process, the goods get formally cleared after the import duties have been paid.

On the other hand, cargo, which moves out of the country, undergoes the reverse process. First, the goods get cleared. Then, the payments for various cargo handling functions are made and finally, the vessel sails with an Export General Manifesto (EGM) out of an Indian port to its next destination.

Specific characteristics of the Indian logistics system The organisation of the Indian logistics system around ports as well as the import/export of goods is different from the situation in the Netherlands in some ways. On the hardware front, the specific function of the Container Freight Station (CFS) and the Inland Container Depot (ICD) has to be mentioned.

Due to the lack of space at the present Indian container terminals, CFSs function in sync with these container terminals. In the European setting, CFSs include mostly

Agent

Customs

Terminal Agent

Port Authority

Barge operator

Bank

Rall operator

Forwarder

Terminal

Port Authority

Barge operator

Bank

Rail operator

Forwarder

Road haulier

Road haulier

Inspection Authorities

Line

Depot

Visualisation of communication without a Port Commnunity System (PCS)

52 • SMART LOGISTICS • MAY 2011

Customs

Inspection Authorities

Line Depot

Visualisation of communication with a PCS as central exchange station/post

warehouses in which storage, stuffing and de-stuffing takes place. To make stacking space available in the restricted area of the container terminals, containers are quickly moved to CFSs. This takes place under the bonded status. At CFSs, the storage of containers and inspection of goods take place. Only when the Customs have inspected and cleared the cargo in CFSs move freely in India to the customer (in case of import) or to the vessel (in case of export).

CFSs are located near container terminals. Sometimes, a shipping line has a dedicated CFS for its containers. The containers have a storage place and are moved to the inspection yard when they have to be inspected. After the containers are cleared, further transport is arranged.

Sometimes, the container gets unloaded and the cargo is loaded as conventional break bulk cargo on a truck. For export cargo, CFS has the same function – storage, inspection and consolidating. The cargo, which moves in as break bulk, is loaded in a container at CFS. On the software front, the specific function of the Customs House Agents (CHA) has to be mentioned. He has a central role in the logistics process. He is both, the custodian of the cargo for the Customs as well as for the Consignee or Commissioner. He acts on behalf of the consignee or the commissioner versus the Customs for filling the Bill of Entry for the Customs. He is present in CFS when inspection of the cargo takes place.

Versus the shipping agent, the CHA hands over the bill of lading (B/L) and pays the charges for the services i.e. the Terminal Handling Charges (THC) and freight charges, if unpaid. In exchange, he receives the Delivery Order (D/O). For export cargo, the CHA pays the shipping lines and gets the required documentation.

Finally, the CHA pays the CFS for their services before the cargo leaves the CFS. In principle, the function of CHA can be executed by any one who registers.

In practice, this is mostly done by a forwarder.

Finally, on the regulatory side, the Cess and the export promotion schemes have to be mentioned. In India, the Excise office, an integral part of the Excise and Customs Department in Ministry of Finance, levies Cess on every item manufactured in India.

This Cess can be refunded in case of export.

Under the Directorate General of

Foreign Trade, there are schemes, which enable the exporter to get refunded local duties and Custom duties on imported materials used in an exported product (‘Duty Drawback’, ‘Duty Exemption Drawback Scheme’, ‘Duty Exemption Entitlement Certificate’). An Excise Officer also acts as a mandated, extended brand of Customs.

OBSERVATIONS Consecutive versus parallel In India, the Customs wants to receive duty payments and inspect goods before the cargo is allowed to enter in free transport in the country. After the security scan at the container terminals, the goods are brought to CFS and wait there till inspection. This inspection takes place only after: • CHA has paid the Customs Duties and he has proof of that in paper • CHA has paid the shipping agent for THC and freight charges and has proof of that and has received D/O manually from the shipping agent.

If CFS does not have a Custom Officer on site, CHA not only has to travel to CFS with the above mentioned documents, but also pick up the Customs Officer and bring him to CFS. This procedure obviously hinders the smooth flow of cargo. Although the cargo is removed as fast as possible from the container terminal (at JNPT 90 per cent is removed within 24 hours), containers can have an average dwell time of 12-14 days in a CFS. In Rotterdam, containers can leave the terminal without having the payments affected. This is collected later. The Customs in the Netherlands also collect the payments later. Everything is done electronically and often through PCS, the data can be seen on computers. Setting Rotterdam as a benchmark, the Indian import system requires at least two handling actions extra – bringing cargo to CFS and bringing the cargo to inspection area at a CFS. Only after these two extra handling actions are met, the container can be put on the truck.

Electronically versus manually Sometimes there is no electronic equivalent in the documentation process of cargo through put from terminal to inland destination. It was also observed that although many digital systems exist and documents are electronically filed and present, documents still have to be

presented physically. Sometimes, this is mandatory, sometimes, this is done as a precaution in case the digital systems malfunction because of a technical fault or electricity failure.

This extra production of paper hinders a smooth process. For companies, it creates an extra burden as, apart from the IT systems, they are also confronted with paper costs and cost of staff running around with the required documentation.

In the case of Rotterdam’s Portbase, costs on paper, telephone and fax are saved.

However, in the case of India, it seems that digitalisation is an extra burden on stakeholders. Although they have invested in IT systems, they still need staff to run around with documentation.

As for payments, it seems that the present systems of the banks and the authorities (port, Customs) do not seem to be so adapted to each other that a seamless process flow can be realised. A slip to give proof of actual payments has to be produced before the authorities/ staff of an organisation.

DOCUMENTATION IN THE INDIAN PORT-LOGISTIC SYSTEM General As mentioned earlier, IPA aims to create a national PCS, which functions on the basis of an electronic exchange of data that is 100 per cent paperless. Benchmarking with the port of the Netherlands, the following flow chart has been prepared: Shipping line (Agent) The shipping line, or his agent, (sometimes also called ‘steamer agent’) files IGM with the harbour master, the container terminal and the Customs. With the harbour master, he files the vessel profile a berth request. IGM gives information about the container if it has to be stored at the CFS or at the ICD with the container number.

These actions can be done electronically.

Customs The Customs file IGM in the ICES system.

However, because relevant data may not always be entered into the ICES system (new policy, new traffic, etc.), the Customs also requires hard copies to process IGM. The harbour master The harbour master enters the vessel profile submitted by the shipping agent into their system. He accepts or rejects the vessel in the port depending on whether the data and the characteristics of the vessel meet the required criteria. Once

MAY 2011 • SMART LOGISTICS • 53

Logistics & documentation in indian ports, continued

the vessel is accepted, he generates a port (SMTP) for rail transport to ICD. rotation number, which is electronically Although this is generated electronically, communicated to the Customs. Customs the document needs to be presented at couple it with the cargo information of the ICD. the vessel.

Client On basis of the characteristics of the Only big customers having a very high vessel and the expected time and activities compliance record can directly pick up the in the port, an advance bill is made and containers from the container terminal. sent to the shipping line (port dues, tug & Truck pilot charges and cargo-related charges).

CFS gets notified that the containers can On the basis of this, payment has to be be picked up. The CFS operator then made. sends its trucks to the container terminal.

The harbour master will not sanction CHA a port clearance, until and unless the Parallel to these processes of the shipping payments due have not been made. agent, Customs and harbour master, the Container terminal process by the Custom House Agents The container terminal discharges the takes place. Commissioned by the client, cargo on the basis of the discharge list, he has filed/files the Bill of Entry (B/E) for which is given to him by the shipping line the payments of import duties. This B/E or agent. This can be done electronically, has to be accompanied by the invoice, but in practice a hard copy is submitted the packing list, certificate of origin and as well. other relevant documentation. This filing A tally man examines the actual can be done electronically. discharge process and notes deviations 2b CHA – Customs from the original IGM (damages, less or If the Customs find it necessary, a ‘query’ more landed containers). On the basis of requesting the submission of clarifications this, the final IGM is made and submitted or additional documentation will be made. electronically to the Customs.

The container terminal places the container in the stack. In the import 1 Shipping line stack, every CFS/liner may have a 3 Agent 2 Harbour dedicated location. However, due Customs Master to space constraints at most Indian container terminals, the container isv moved to CFS as soon as possible.

11.

The container terminal receives its Custom 4 3b House Agent payments from the shipping agent. As Container Vessel (CHA) Terminal Acceptance there is a lasting relationship between the terminal operator and the liner, the cargo can leave the container before these payments have been 3c 2b.

5 effected.

Vessel/Cargo Customs Customs Charges Customs Once the Customs receives the final IGM, the clearance 6.

8.

9. of transport is given Train Client Truck Yard (Factory) directly to the Client, to the train yard, for transport to the ICD or to the CFS. 7.

10.

Train yard ICD CFS The container terminal trucks the container to the rail yard.

12.

12.

ICD Client Client The Customs issue a Sub Manifest Broad overview of process flow cargo-documentation in Indian ports Transport Permission

54 • SMART LOGISTICS • MAY 2011

Once the payments are received, the cargo gets selected for inspection. CHA has to arrange at CFS that this inspection is effected.

CHA – Shipping Line (Agent) CHA pays the shipping line/agent the terminal handling costs and the freight charges due. He hands over the B/L. In return for the payments of charges and handling over of B/L, the CHA receives the D/O from the shipping agent.

CHA – CFS With the D/O and the slip of the ‘Custom Duties paid’, CHA goes to CFS or ICD. If needed, CHA also takes along the Customs Officer for inspection.

At CFS, the container is brought to the inspection area. After inspection and approval by the Customs, CHA pays CFS and the container is then transported to the client.

MAIN FEATURES OF THE EXPORT PROCESS Factory The factory, which exports, can be in three categories: A. Excise Officer present on premises B. Factory has ‘self-sealing provision’ C. Factory closes a loaded container on the premises with a Ped Lock.

In case A After a request has been given, the Excise Officer at a factory, which acts as per the instruction of the Customs, oversees the actual loading of the reverse side of the invoice that he was physically present during the loading process, and gives a stamp. The stamped invoice and packing list and the application for refunding the documents are sealed in a cover. Normally, one copy goes to CHA/ shipper, while the other copy goes to the driver of the truck, which transports the container. This container can, in principle, be brought directly to the container terminal. If the terminal cannot receive the container, then it is brought to the container yard of a shipping line, normally beside, or integrated in CFS. In case B After sealing, the container is directly sent to a CFS. In case C It also goes to a CFS. CHA Parallel to the above process, CHA files a Shipping Bill (S/B) with the Customs.

Filing at Customs can be electronically done. CHA interacts with the Customs,

CFS and shipping line agent for 1. Factory various documents.

It collects the necessary 3. Customs documents and is present when the Customs Officer checks the 4. CFS/Containeryard container at CFS. He has to 2. CHA travel physically between CFS and Customs House with the documentation. He interacts 5. Container Terminal with the shipping agent to pay the charges and receives the B/ 7.

Harbour L and the shipping mate receipt.

6. Shipping Agent Master When all the documentation Office is ready, he gives it to the Main features of process export (truck) shipper, who can then effect the refunding of the various payments done earlier.

CHA and CFS. That is how CFS knows Customs which container has to be trucked to the In case A: terminal.

The container goes directly to the Shipping agent container terminal, the Customs check The shipping agent collects the fees and the documentation and the seal at the freight charges from CHA. This payment container terminal’s gate. If everything is in is still with most liners in cash. Then, the order, he will CHA a ‘check seal in order’.

B/L is issued. However, you still have to CHA then goes to the Customs House show, on a slip, the actual payment before with the sealed documentation (stamped the B/L is issued. invoice, packing list, etc). The Customs After the containers have been loaded, receives the documentation and a ‘Let the shipping agent gives, as proof of the Export Order’ is given. actual physical presence of the container In case B: in the vessel, a mate receipt. He hands At CFS, the customs check the container this over to CHA. and the documentation in the presence Harbour master office of CHA. If there is no problem with the When the cargo is loaded, the Customs cargo, the Let Export Order is given. formalities are finalised and the port dues In case C: paid, the harbour master clears the vessel In the presence of CHA, the Customs to leave the port. check the cargo, sometimes physically.

INFERENCE They seal the container. In the case of less Set against the benchmark of the than container load (LCL), the physical situation in the Netherlands, the following inspection of the cargo takes place on observations can be made: the basis of the Shipping Bill, invoice and A complete separation of cargo, packing list. documentation and payments flow is yet to CFS be realised. The flows are not parallel, but The inspection and storage of the sometimes, consecutive. At various points container to be exported takes place at in the cargo flow, the process stops if CFS or at the container yard beside it. documentation or payment requirements In the case of LCL cargo, the forwarder have not been met. A physical interaction consolidates the cargo. According to a takes place. In the import and export Container Load Plan (CLP), a container processes, the interaction between the is staffed. This CLP has to be endorsed Customs and CHA are the most relevant by the Customs and then handed over in this respect. to CHA. The documentation flow is not 100 Container Terminal per cent digitalised. In the import process, The containers, which have to be loaded documentation has to be physically present in the vessel, are received at the container before the next step i.e. inspection at terminal. A port berthing meeting is CFS can take place. Also, in the export conducted on a daily basis in the port. process, documentation has to be shown During the meeting, the foreseen (inspection at CFS by Customs, entry of schedules of vessels for that day are goods directly in the container terminal). established. The result is then emailed to

Then, in a number of steps parallel to electronic filling, a hard copy also has to be produced.

Container terminals in India have to operate in symbiosis with CFSs. As long as the Customs’ procedures have not changed, and cargo, documentation and payment systems have been separated, the time-consuming activities now done at CFSs will result in extra costs and extra time as compared with the practice at the Rotterdam container terminal.

CHA has to travel quite a distance between the container terminal, Customs House and CFS for the clearance of goods both, import and export. This results in extra costs and extra time.

RECOMMENDATIONS Based on the understanding of the present flow of documentation and payments, the following recommendations can be made: • Customs should adopt a serviceoriented mentality in the current Indian socio-economic and cultural situation • Transparent and electronic processing of documents and face-to-face meetings should be minimised to avoid opportunities for corruption and/or bribery • Customs should investigate whether an advance list of containers should be scanned or should be inspected and given to the container terminal • Digital signature should be approved and introduced as soon as possible so that a complete paperless handling of documentation and payment flow is made possible • Stimulation projects for the use of electronic, digital equipment should be set up, to increase the penetration of internet • Class fibre-optic cables should be made available in the ports and areas around the ports, where container yards and CFSs are situated • The inspection process at CFS could be improved by abolishing the need to show physically the documentation already also available in the Bill of Entry, or Shipping Bill, in the ICES system • It should be investigated whether the mate receipt can be abolished.

This article is an excerpt from the research paper, ‘Dutch – Indian Experts Views Management Report’.

MAY 2011 • SMART LOGISTICS • 55

TECH TRACK IT TRENDS IN LOGISTICS

Technology for making renewable petroleum in the offing UNIVERSITY

of pressure due to fuel Minnesota researchers price rise. The university are a step closer to is currently filing patents making renewable on the process. Aditya petroleum fuels using Bhan and Lanny Schmidt, bacteria, sunlight and chemical engineering carbon dioxide (CO2). professors, College of A major success came Science and Engineering, in when a graduate are converting the student, Janice Frias ketones into diesel figured out that fuel using the catalytic proteins can be used technology that they to transform fatty have developed recently. acids, produced by the The ability to produce bacteria into ketones, ketones opens the door can be cracked to to make petroleum-like Researchers have taken a crucial step towards making renewable petroleum by figuring out how make hydrocarbon hydrocarbon fuels using to use protein to transform fatty acids to make fuels. If successful, this only bacteria, sunlight hydro carbon fuels. will prove to be a boon and CO 2. “There is enormous interest in using CO2 to for logistics companies, who are under

make hydrocarbon fuels. CO2 is the major greenhouse gas mediating global climate change. So, removing it from the atmosphere is good for the environment.

It is also free and we can use the same infrastructure to process and transport this new hydrocarbon fuel that we use for fossil fuels,” says Larry Wackett, McKnight Professor of Biochemistry.

The research is funded by a $2.2million grant from the US Department of Energy’s Advanced Research Projects Agency-energy (ARPA-e) programme.

Wackett is the principal investigator for the ARPA-e grant. His team of co-investigators includes Jeffrey Gralnick, Assistant Professor of Microbiology and Marc von Keitz, Chief Technical Officer of BioCee, as well as Bhan and Schmidt.

Nigerian develops WMS for inventory

New tag for retail and SCM released

KENNETH Okpeki, a Nigerian, has designed a programme, which warehouse managers and storekeepers can use to monitor and keep accurate records of their inventory.

According to Okpeki, the programme was basically designed for warehouses as it would enable those in charge detect when items are taken away from the stock. He informs, “The programme that has been designed is like an inventory programme that will help the supervisor, the manager and others directly involved in the warehouse business to make quick assessment of what is in the warehouse.

So, it makes inventory stock-taking faster for the supervisor.” Speaking on how the software functions, Okpeki who graduated from the London School of Management, UK, explains that the software is a threetier programme comprising database, user interface and middle layer, which does the actual manipulation of data.

The database part of the programme stores all the information concerning the stock, while the user interface helps one enter information of what goes in and out

56 • SMART LOGISTICS • MAY 2011

of the warehouse. “So with this, one can upgrade information about what is in the stock through the user interface, while the middle layer does the manipulation of data,” said Okpeki. He, however, added that his programme would not detect theft. “What the software can detect is a missing item i.e. if the data on the computer does not match the numbers in the warehouse, or if goods are out of stock in the warehouse and the information about these goods is still in the computer. This means that there is something wrong in the warehouse,” he explained. Elaborating on the challenges, Okpeki said, “My main challenge in developing the software is that people and places for which I am designing the programme are not readily available. The ICT market in Nigeria is quite profitable.

For example, a brand new Microsoft office sells for about N50,000, for one CD. So it is a very profitable market, but people are not interested in getting these materials, which will make it seem like one is not making any progress in that area,” he added.

A new passive ultra-high frequency Gen 2 RFID (Radio Frequency Identification) tag has been recently launched by GAO RFID. The tag is designed for use in retail and supply chain management, asset tracking, document management and logistics.

This RFID tag – model 116008 – is waterproof, dust proof and is resistant to immersion in salt water, alcohol, oil & 10 per cent HCL ammonia. In addition, it is vibration resistant and tuned for edge-on reading. The passive tag is compliant with EPC Class 1 Gen 2 standard and the ISO18000-6C protocol. It operates at a frequency range of 902–928 MHz for US standards and has a 96-bit memory capacity for data storage.

The RFID tag, which provides both near-field and far-field communication modes, is also suitable for item-level tagging applications. It enables multidetection and offers a maximum read quantity of 400 tags per second.

Crash sensor to enhance safety in warehouses RESEARCHERS have devised a wireless, sensor-based system to provide continuous monitoring of the condition of storage shelves. At the end of a days work, when warehouse employees want to deposit the last palettes quickly before heading home, this system will prove to be very effective in ensuring workplace safety.

In large warehouses, employees have to manoeuvre goods through the narrow aisles, often under time pressure and in the process, end up colliding with the shelf support. Even harmless-seeming collisions are not safe, as over time, they may destabilise the shelf supports. In the worst case, the high-rack storage can come crashing down and prove to be a serious hazard for employees working below. This is why the supports must be routinely checked for any damage.

As of now, an employee has to inspect each shelf individually, which is a laborious and time-consuming process. A further drawback – if a support is damaged immediately after an inspection, it goes undetected until the next round. However, a new monitoring system developed by researchers at the Fraunhofer Institute for Microelectronic Circuits and Systems IMS, Duisburg, in collaboration with IWS Handling GmbH, can monitor the condition of each individual support round the clock with the aid of a network of wireless sensors. “Since DIN EN 15635 was introduced, the demands on the operation of shelf systems have significantly increased. As a result, regular inspections have become indispensable,” says Dr Weiner, MD, IWS Handling.

Typically, to protect them from collisions, the supports are fitted with a kind of air cushion designed to absorb the impact.

“We have integrated sensors in this protective fitting that measure the pressure within the air cushion,” explains Frederic Meyer, Project Manager, IMS. If the air cushion is collided with, the sensor registers the change in interior pressure and reports this via radio relay to a central control station located in the warehouse manager’s office. Repeaters positioned at several points throughout the warehouse receive the messages from the sensor nodes and pass these to the control station. All the warehouse manager needs to do is glance at the base station to know when and where the last collision took place within the hall. The system automatically provides him a report of whether the impact was harmless, of medium strength or serious. While no immediate measures are required for light collisions, in the event of a category three incident, the warehouse manager will immediately send an employee to the shelf in question.

Energy management plays a central role in developing this new technology. “After all, the use of such a system only pays off if you do not have to constantly replace the batteries in the sensors,” Meyer adds. The researchers in Duisburg have configured the system so that the electronics spend most of their time in energy-saving sleep mode. The sensor nodes get active only when there is a fluctuation in pressure. At certain intervals, though – the settings can be varied individually – each sensor node sends a ‘sign of life’ along with its current battery status to a repeater. This ensures that the failure of a signal node will not go unnoticed and is reported to the control station.

MAY 2011 • SMART LOGISTICS • 57

TECHNOLOGY TRENDS

ENHANCING EFFICIENCIES

IT SOLUTIONS FOR VISIBILITY CHALLENGES As supply chains go global, achieving end-to-end visibility across an extended value chain becomes difficult. While most manufacturers face similar supply chain visibility problems, their pressing pain points differ. Narrowing the scope of their efforts to the primary pain point surrounding visibility is the best way for them to achieve demonstrable results.

SUPPLY chain visibility has become a

said Anil Gupta, Principal, Applications Marketing Group, a consulting firm.

hot topic, as companies struggle to keep costs low while increasing efficiency and service levels. A clear view of the happennings across the supply chain has become a competitive imperative.

Simply defining the supply chain visibility challenge is tough in itself.

Learning how to define the scope of a supply chain visibility project and finding out how to identify the most relevant pain points in an organisation to build visibility projects around will prove to be beneficial.

SUPPLY CHAIN NETWORK

THE EVOLVING SCENARIO Not so long ago, effective supply chain management meant staying abreast of orders, inventory levels, raw materials and parts supplies in the confines of a manufacturer’s four walls. Yet fast forward a decade and the game has completely changed, driven primarily by globalisation and the rise of outsourcing.

Today’s manufacturers have multitiered networks of suppliers, partners and customers, all of them playing a pivotal role in bringing a product to the market.

Now, factor in the economic downturn, customer demand changes and a multitude of possible supply chain interruptions, and manufacturers are looking at a more complex picture.

Traditional enterprise software platforms such as ERP or SCM are not equipped to deliver end-to-end visibility and controls that a manufacturer requires to optimise its supply chain from the standpoint of both, cost and operational

58 • SMART LOGISTICS • MAY 2011

performance efficiencies.

“Fifteen years ago, an ERP system gave good visibility into where everything was within the four walls of a company – from the location of parts to what was on order. As companies started outsourcing and more core business functions moved outside the four walls, ERP no longer had visibility into all of that. Companies now need inter-enterprise processes and visibility, along with access to information that is not necessarily within their company,”

The number of partners composing a supply chain network is certainly on the rise, according to a Supply Chain Benchmark survey by Gatepoint Research and E2open, a provider of on-demand, multi-enterprise demand-supply network solutions.

In the survey, more than half of the 4,000 respondents reported having in excess of 500 component suppliers or manufacturing partners.

Of that broad network, 44 per cent of respondents said that they had deficient visibility into tier 1 suppliers, while 75 per cent confirmed that they had insufficient visibility into tier 2 and 3 suppliers. Over 80 per cent of respondents admitted that they had not yet automated – or had only partially automated – their supply chain processes.

Much of the problem lies with the fact that there is no single definition of supply chain visibility, nor is there a well-defined product category of solutions. According to Noha Tohamy, Vice President – Research, AMR Research, a Gartner company Rather, the definition of supply chain visibility depends on the kind of manufacturer being considered. A hightech manufacturer, for example, would probably describe its need for visibility from a supply-side perspective, as a way to do rapid planning and stay on top of what is going on with contract partners, said Tohamy. On the other hand, a consumer

products manufacturer would view supply chain visibility from the demand side, in terms of leveraging downstream or pointof-sale data to come up with better forecasts and, eventually, to optimise inventory and sales.

BUILDING THE CASE FOR VISIBILITY Supply chain visibility on its own is not enough to make a business case for a project, whether it involves purchasing enterprise software, on-demand supplier network solutions or carrying out custom integration to sync up existing business systems.

To make a successful case for supply chain visibility, manufacturers need to zero in on the most relevant pain point for the business and build the case for visibility around that. For instance, for manufacturers dealing with contract outsourcing, having real-time visibility into interruptions that could affect product delivery or quality levels can help manage customer expectations, reduce returns and provide overall better service. For manufacturers of packaged goods, being able to collaborate with suppliers and share real-time forecasts and demand data can help reduce inventory on hand and improve order fill rates.

“If you are a company or a supply chain investing in a supply chain visibility solution, bring it back to a very concrete business benefit that you are expecting,” said Tohamy. The business owners expecting benefit from the initiative should work in tandem with supply chain management, the CFO and high-level representatives from IT to make the business case for supply chain visibility projects. It helps to pick one spot to start and link that project to the CEO’s core mission.

ENHANCING VISIBILITY TO ACHIEVE COMPLIANCE Providing a more accurate, real-time picture of demand signals or supplier inventory levels is the focus of most manufacturers’ supply chain visibility projects. But facing an increasingly complex regulatory climate, manufacturers are beginning to want enhanced visibility to help meet compliance directives related to trade practices, environmental mandates and upcoming serialisation and track and trace laws.

“Compliance is an up-and-coming factor, and manufacturers are expecting

CASE STUDY One Project At A Time For food giant Del Monte, the primary pain point around visibility had everything to do with bolstering the order fill rate for its retail customers, without having to carry significant inventory. Three years ago, the company had embarked on a corporate mission to be recognised at the No 1 CPG supply chain by its customers, and two specific supply chain visibility projects played into that goal.

The manufacturer put in a new demand management system from JDA Software in addition to leveraging on-demand supply chain planning, execution and business analysis services from One Network, which functions as the order execution tool. “The two together address our key concerns: predicting what our customers want and making sure what we have reaches there,” said Rob Ferguson, Director – Supply Chain Projects, Del Monte. “Previously, we had no inventory visibility to know the location of products, nor did we know what to move to fill anticipated customer demand,” Ferguson added.

Not anymore. Today, Del Monte has become 20-30 per cent more accurate with order prediction, resulting in fill rates that are the highest in the company’s history. In addition, proven retailers can achieve 99 per cent in store, in stock rates with a total of 15-20 days of retailer inventory, according to Ferguson.

Flush with this success, Del Monte will now broaden its efforts to deliver similar visibility to suppliers. At BreconRidge, a contract manufacturer in the electronics industry, the visibility issue was more about inventory management and control, as well as visibility for revenue recognition. The company had difficulty getting a clear and accurate picture of inventory despite using existing tools like Excel and its SAP ERP system, informed Paul Smithson, corporate planner at BreconRidge.

In 2007, the firm began using Kinaxis’ RapidResponse on-demand supply chain management service, initially in the demand intake process. This allowed planners to analyse the impact of changes to enable them determine accurate commit dates to customers and identify any materials that were holding up the process. “If we can control demand going into the box effectively, it helps us with on-time delivery and inventory management processes downstream,” Smithson said.

Over time, BreconRidge gave buyers access to the system, providing them visibility into demand constraints for suppliers that could affect the realisation of revenue. Next up is giving customers access to the system so that they get visibility into things like their order book profile, inventory and status of shipments, Smithson said, “It will give them a level of confidence so that they can see what we are doing and are committed to.” a lot more regulations for environmental compliance, around packaging for trade compliance and things like ePedigree, for understanding where one’s product comes from. We see a lot of manufacturers working with the government and their customers to come up with investment options without stifling their ability to be profitable and efficient within their supply chains,” said Tohamy.

ENVIRONMENTAL COMPLIANCE One of the more prominent areas where enhanced supply chain visibility comes into play is environmental compliance.

Regulations like Registration, Evaluation, Authorization and Restriction of Chemical Substances (REACH), which makes manufacturers responsible for tracking and managing hazardous chemical substances that are part of their products; Restriction

MAY 2011 • SMART LOGISTICS • 61

Enhancing efficiencies, continued

Common supply chain visibility projects Collaborative demand planning: While a major factor for consumer products manufacturers, companies in other segments also need more accurate and real-time information on customer demand. Collaboration hubs or tools that allow a manufacturer and its customers share demand and inventory information and manage exceptions greatly aids in inventory management and keeping operating costs low. “Manufacturers today are interested in better forecast accuracy, and that requires more demand visibility than they had before,” said Noha Tohamy, Vice President – Research, AMR Research.

Risk management around suppliers: As manufacturers look to low-cost suppliers overseas, they open up their supply chains to a certain degree of risk. Tools or platforms that provide information about the financial standing of suppliers or deliver a window into a contract manufacturer’s inventory and the ability to fulfill order commitments can help a manufacturer mitigate risk around quality and time-to-delivery issues.

Track and trace visibility: Knowing exactly where orders or inventory are in real-time is critical for manufacturers so that they can ensure that they have the right products and inventory in the right place, at the right time.

This ultimately helps them deliver high-quality customer service.

Sales and operations planning: An increasingly popular supply chain visibility project delivers a 360-degree view of a company. By accounting for all functional areas of the organisation as part of business planning, manufacturers can more effectively match supply to demand and make informed decisions on order fulfillment and inventory based on customer profitability and other factors.

of Hazardous Substances (RoHS); and Waste from Electrical and Electronic Equipment (WEEE) up the ante for manufacturers. These directives require manufacturers to keep tab not only on the attributes of supplier components and materials that go into their products, but also on how those parts and components are disposed of and potentially recycled at the end of life.

The ramifications for manufacturers that are not on top of these mandates can be quite significant – costly redesigns, scrapped parts, blocked shipments, potential customer dissatisfaction and, possibly, steep fines. Most manufacturers still use spreadsheets, homegrown databases, and also manual processes to retrieve and manage this data with their supply chain. Increasingly, however, a variety of enterprise systems – from supply chain offerings to product lifecycle management (PLM) suites – are adding functionality to help manufacturers automate these processes and more effectively track and improve the environmental performance of their products.

Forthcoming environmental regulations

62 • SMART LOGISTICS • MAY 2011

around carbon emissions will be the real game changer for manufacturers, stepping up the need for visibility solutions to aid in meeting compliance. According to a study by the Business Performance Management Forum and E2open, 42 per cent of more than 125 companies surveyed have yet to consider carbon footprint or greenhouse gas emissions across their extended supply chain. While 76 per cent of respondents said that their customers have not requested such information, two-thirds expect them to demand such data in the coming years.

Aside from environmental compliance, new laws related to global trade are another area where manufacturers can benefit from better visibility in their supply chains. Global trade management solutions, like those from Management Dynamics, Oracle and others, automate the processes that allow manufacturers to efficiently trade and collaborate across borders and ensure that they pay the correct amount of duty while protecting against fines and penalties, as well as loss of trading privileges.

Directives around serialisation and

track and trace laws emerging in such industries as pharmaceuticals and retail are yet another area of compliance that can directly benefit from improved supply chain visibility. Companies such as Acsis and IBM, among others, are offering solutions, many of which are based on barcode and radio frequency identification (RFID) technology, to help track, monitor and measure the chain of custody of a product as it moves through its lifecycle.

Despite the fact that all these compliance efforts create visibility challenges for manufacturers, experts say that compliance is rarely a springboard for building a case for a specific supply chain visibility project. Therefore, organisations should focus on traceability and visibility of products, rather than on compliance.

FAST PAYBACK SUPPLY CHAIN VISIBILITY PROJECTS As manufacturers’ supply chains go global and become increasingly complex, attaining end-to-end visibility across an extended value chain is like trying to keep pace on a treadmill. Therefore, experts suggest that manufacturers take on the visibility challenge by narrowing the scope of their efforts to the primary pain point surrounding visibility as the best way to achieve demonstrable results and to chart a course going forward.

“You have to pick your spot – spray and pray does not work with this kind of effort. You have got to give some serious thought to the corporate CEO initiative – that is how you pick your first one,” said Ann Grackin, CEO, ChainLink Research, a research and advisory company specialising in supply chain issues.

While most manufacturers face a common set of supply chain visibility problems, their most pressing pain points will differ, depending on the kind of manufacturer they are, where they sit in their own value chain and the kind of industry they are in. The most universal visibility challenges are related to demand and inventory management, while having up-to-date track and trace information on orders as they move through the logistics and fulfillment cycle. This is another potential area that manufacturers target for visibility.

The article is an excerpt from ebook ‘Improving Supply Chain Visibility Via Technology’ by Management Dynamics Inc.

DISTRIBUTION CENTRE PLANNING WAREHOUSING & DC

HOW TO CHOOSE DC LOCATION Storage/warehousing and distribution components form an important link in the entire logistics chain. Distribution centres are an important part of this chain since they act as a bridge between producers and retailers. Because of this crucial role they play, it becomes extremely important to identify suitable locations for these centres, especially along the path of goods movement. One also needs to consider that these centres are situated near the demand points.

THE Indian logistics industry is in transition. India is investing up to half trillion US dollars in building greenfield airports and seaports, upgrading the existing ports and also in the National Highways Development Project (NHDP) involving North-South, East-West, and Golden Quadrilateral road networks.

There are also various initiatives to

change the regulatory aspects such as the uniform Value Added Tax. Enter 2012, these infrastructure facilities will be ready to use and provide the path for goods movement.

There is also a revolution taking place in the country in the logistics real estate area with the emergence of office space, malls, supermarkets, etc., in big cities and in

tier II and tier III cities. Manufacturing and service industries are being encouraged to move to the tier II and tier III cities, thus creating a demand for business services and organised retail in these locations.

ROLE OF DISTRIBUTION CENTRES Distribution centres (DC) provide a

MAY 2011 • SMART LOGISTICS • 63

Distribution centre planning, continued

Figure 1: Cities with potential to become distribution centres

State

With CWC’s* warehouse facility

Without CWC Warehouse facility

Andhra Pradesh

Nayudupeta, Kavali, Eluru, Tanuku, Mandapeta, Dharmavaram, Nellore, Ongole, Chilakaluripeta, Guntur, Vijayawada, Tadepalligudem, Anakapalli, Srikakulam Sompeta, Palasa, Dichpur, Ramanthapur, Rajamundry, Visakhapatnam (Vizag), Hyderabad, Adilabad, Kamareddi, Dabeerpura, Medchal, Nandigam Farrukhnagar, Balanagar, Jadcharla, Kurnool, Ananthapur Malleboinpally, Dhone, Gooty, Kandukuru, Nagasamudram

Assam

Guwahati, Dimapur

Bihar

Aurangabadh, Dehri (sone)

Muzaffarpur, Forbesganj, Sasaram

Gujarat

Ahmedabad, Nadiad, Anand, Vadodara (Baroda), Surat, Rajkot

Jetpur, Gondal, Radhanpur, Deesa, Himatnagar, Bharuch

Haryana

Karnal, Faridabad

Panipat

Jammu

Srinagar

Karnataka

Belgaum, Dharwad, Hubli, Chitradurga, Tumkur, Bengaluru

Sankeshwar, Belagavi, Devanhalli

Madhya Pradesh

Shivpuri, Morena, Gwalior, Narshinghpur

Lakhnadon, Ganeshganj

Maharashtra

Navi Mumbai, Panvel, Khopoli, Karad, Kolhapur, Nagpur, Karanji

Satara, Kagal, Amadi, Kamthi, Jamb, Hinganghat Amadi, Kamthi, Jamb, Hinganghat

Orissa

Berhampur, Balasore

Khurda, Bhadrak

Punjab

Pathankot, Ludhiana, Sirhind

Jalandhar

Rajasthan

Kot Putli, Jaipur, Ajmer, Udaipur, Kota

Nasirabad, Bhilwara

Tamil Nadu

Hosur, Madhurai, Virudunagar

Vaniyambadi, Ambur, Dharmapuri, Salem, Vedasandur, Dindigul, Pambankulam Cape Comorin

Uttar Pradesh

Kanpur, Etawah, Jhansi, Kanpur, Lucknow, Gorakhpur

Varanasi(Banaras), Handia, Allahabad, Khaga, Fathepur, Sikandra, Firozabad, Agra, Mathura, Orai, Ayodhya, Lalitpur

West Bengal

Kharagpur, Maheshtala, Burdwan (Burdhamaan)

Maibang, Silchar

*Centralised Warehousing Corporation

crucial link between producers and retailers. They are important subsystems in the supply chain network and their location is critical for matching supply and demand. Herein an approach is described to identify locations for warehousing and DC along the path of goods movement and the path closer to demand points.

In a complex manufacturing supply chain network, all the nodes of the supply chain must be efficient and rapidly responsive to eliminate delays and wastage, improve production efficiency and match the supply capabilities with demand requirements. The DCs, located between the manufacturers and the retailers, basically enable matching the supply and the demand in the presence of various uncertainties.

State-of-the-art DCs are equipped with automated storage & retrieval systems, RFID tags providing unit-level or containerlevel visibility & inventory accuracy, connectivity with the manufacturer ERP systems, and retail store POS systems.

They also offer value-added services such as cross docking, customisation, kitting, labelling, management reporting, merge-in-transit, manufacturing support, order taking, pick & pack, repair or refurbishment, reverse logistics, special

64 • SMART LOGISTICS • MAY 2011

Figure 2: Conducive locations for establishing DCs after studying the existing warehouse data, upcoming highways routes and railway freight corridors

packaging and sub assembly.

Furthermore, associated services such as call centre management, consultancy services including systems integration & process reengineering, customs brokerage, freight consolidation, purchase order management and quality control could also be provided. The distributors also provide producers with sales information as well as forecasts of the pattern of consumer demand.

BOTTLENECKS IN DISTRIBUTION SERVICES Currently, the distribution services sector in India is largely unorganised and suffers from poor access to capital, lack of management skills, fragmented supply chain and unfavourable regulations, infrastructural bottlenecks in the form of lack of access to quality transport, storage facilities, etc. All these add up to low productivity and poor performance.

In the case of wholesale trading, warehouses/godowns/mandis are often located inside the cities leading to delays in bulk breaking and reconsolidating. There is a shortage of warehousing facilities, cold storage and large-scale processing units.

Moreover, the existing godowns do not meet quality standards.

Many large retailers such as HLL, ITC and Asian Paints, have developed in-house product lines & brands and established their own regional dealer networks in order to improve the flow of goods. Central Warehousing Corporation (CWC), a premier warehousing agency in India, was initially established for providing logistics support to the agricultural sector.

It operates 490 warehouses across the country with a storage capacity of 9.8 million tonne. CWC’s warehousing activities include food grain warehouses, industrial warehousing, custom-bonded warehouses, container freight stations, inland clearance depots and air cargo complexes. Apart from storage and handling, CWC also offers services in the area of clearing and forwarding, handling & transportation, procurement and distribution, etc.

The present CWC facilities are not state-of-the-art. Also, third party logistics companies, including Gati, TCI, DHL, etc. maintain warehouses for their clients. The design or redesign of these warehouses into large-scale distribution networks entails taking decisions on a range of issues, including the location and size of DC, the logistics activities to be performed at these

centres, the capacities required to fulfill these activities, their allocation to specific product groups and the control system to manage all activities, including disruptions.

for setting up DC for different businesses.

At the second stage, data was collected for the respective cities on the following 11 variables for rank ordering the cities as tier II, III, and IV.

TOWARDS GOOD MOVEMENT In 1994, Mueller and Laposa published ‘The Path of Goods Movement’ that identified a new paradigm in the analysis of warehouse space demand and location.

Over the past two decades, the ‘Path of Goods Movement’ (POGM) concept has been embraced by the real estate industry and large real estate investors have even based their warehouse acquisition and management strategies on this concept.

Location of the warehouse space was the key contribution of the POGM research.

It was found that analysing the routes along which goods move using shipping weight (in tonnage) was the best way to find locations with a strong demand for warehouse space.

Finding the best points along the POGM, where shipments can ‘break bulk’, be stored and then re-distributed to their final destination should produce the best demand for warehouse space in the future. Superimposing the routes of the upcoming rail, road, water, air infrastructure, and the existing warehouse locations falling on these routes would forecast ideal DC locations across India for facility locators of various verticals.

The transport infrastructure determines the path of goods movement and the demand points are determined by the markets and the investment climate.

DATA DRIVEN FUTURE Global Logistics and Manufacturing Strategies (GLAMS) has recently worked on forecasting conducive locations for setting up DC. Superimposing the routes of national highways covering Golden Quadrilateral, North-East, South-West Corridors, major ports and warehouses required huge data sets to form the backdrop. The data was collected in two stages and through different sources. The first-stage data collected comprised information on routes of upcoming national highways; list of existing warehouses; routes of upcoming dedicated freight corridors; major ports connecting to national highways and the existing container port terminals.

The superimposition of the above routes and facilities on the Indian Territory exposed a set of 136 prospective locations

Product/Value Chain Markets in the Vicinity Trading Hubs Investment Environment Resources and Management Logistics Providers Infrastructure Availability Economic Integration Land Prices Taxation Structure Corruption Levels Security/Law and Order Connecting Technologies Intermodal Logistics IT accessibility The eleven variables used for rank ordering the cities

FORECASTED DC LOCATIONS Keeping in view all the opportunities that are coming up in the Indian infrastructure and logistics industry in the forthcoming years, the study forecasted the cities in Figure 1 as conducive locations for establishing DCs for different businesses.

Resultant cities after superimposing the existing warehouse data, upcoming highways routes and railway freight corridors are briefed in Figure 2. The metros are excluded from the table since the focus of the present work is to forecast the ideal DC locations across India. Hence, tier II cities, which have a potential for growth in the near future are only presented in it.

ADDRESSING STRATEGIC ISSUES There are several developments that need to take place to make infrastructure work and to derive the returns on the huge investments made in building the transport network and also the facilities. There is a tremendous need for developments in the areas of efficient operation of the DC using ITeS, financing DC construction, manufacture of trucks that can carry the container traffic, evolution of 3PLs, transport scheduling, etc.

Professor N Viswanadham, Clinical Professor and Executive Director, Centre for Global Logistics and Manufacturing Strategies (GLAMS) at the ISB. The article has been repurposed from ISB-Insight. email: N_Viswanadham@exchange.isb.edu

MAY 2011 • SMART LOGISTICS • 65

PRODUCT & ADVERTISERS’ INDEX

To know more about the advertisers in this magazine, refer to our ‘Product Index’ / ‘Advertisers’ Index’ or write to us at b2b@infomedia18.in or call us at +91-22-3003 4640 or fax us at +91-22-3003 4499 and we will send your enquiries to the advertisers directly to help you source better

Products

Pg No

Products

Pg No

Air freight & road transport ............................................................................... BC

Inventory management .......................................................................................... BC

Barcode & RFID technologies .............................................................................57

Laptops ................................................................................................................................ 7

Container transpoter ................................................................................................66 Containerized transportation ............................................................................BIC

Project logistics ........................................................................................................... BC Projectors ........................................................................................................................... 7

Desktops............................................................................................................................. 7 Reverse logistics ......................................................................................................... BC Everest pre engineered steel buildings ........................................................FIC Supply chain management-design & planning .......................................... BC Exhibition -Engineering Expo ................................................................................. 4 Freight forwarding .......................................................................................................27

The International Trade Awards 2010-11...................................................31

Freight management- sea freight ..................................................................... BC

Warehouses ........................................................................................................ BIC,BC

Iax fcl services ...............................................................................................................27

Warehousing & storage solutions ....................................................................... 3

Pg No

Advertiser

Tel. No.

E-Mail

Website

BC

Alfa Supply Chain Solutins Pvt Ltd.

+91-2522-645274

siddhartha@alfasolutions.in

www.alfasolutions.in

7

Dell India Pvt Ltd

–

–

www.dell.co.in

4

Engineering Expo

+91-22-30034690

engg-expo@infomedia18.in

www.engg-expo.com

FIC

Everest Industries Ltd

+91-11-41731952

mgarg@everestind.com

www.everestind.com

57

Great Eastern Impex Pvt Ltd

+91-124-2347431

info@geipl.com

www.geipl.com

66

Majha Transport Pvt Ltd

+91-11-26366926

gagan@majha.in

www.majha.in

27

MFC Transport Pvt Ltd.

+91-22-40341477

mfc@mfctransport.com

www.mfctransport.com

3

Schaefer Systems International Pvt Ltd.

+91-22-67410770

schaefer@ssi-schaefer.in

www.ssi-schaefer-asia.com

31

The International Trade Awards 2010-11

+1800-103-5311

–

www.ita.moneycontrol.com

BIC

Vijay Logistics Pvt Ltd

+91-2135-675000

info@vijaylogistics.com

www.vijaylogistics.com

Our consistent advertisers COC = Cover-on-Cover, FIC = Front Inside Cover, BIC = Back Inside Cover, BC = Back Cover

Our consistent advertisers COC = Cover-on-Cover, FIC = Front Inside Cover, BIC = Back Inside Cover, BC = Back Cover

66 • SMART LOGISTICS • MAY 2011

Use this form for free additional Information on advertisements published in this issue. We will send your inquiries to the advertisers and ask them to send you the details or contact you directly.

HOW TO USE THIS FORM: • Please tick against the box of advertiser(s) you are interested in: • Mention specific product/ service you need, against the advertiser’s name • Complete all the details on this form.

• Tear the form & mail it to us. (It is a prepaid mail) Tel.: +91-22-3003 4640 • Fax: +91-22-3003 4499

E-mail: b2b@infomedia18.in PRODUCT INQUIRY FORM Air freight & road transport

Inventory management

Barcode & RFID technologies

Laptops

Container transpoter

Project logistics

Containerized transportation

Projectors

Desktops

Reverse logistics

Everest pre engineered steel buildings

Supply chain management-design &

Exhibition -Engineering Expo

First Fold Here

planning

Freight forwarding

The International Trade Awards 2010-11

Freight management- sea freight

Warehouses

Iax fcl services

Warehousing & storage solutions ADVERTISERS’ INQUIRY FORM

Second Fold Here Majha Transport Pvt Ltd.

Dell India Pvt Ltd.

MFC Transport Pvt Ltd.

Engineering Expo

Schaefer Systems International Pvt Ltd.

Everest Industries Ltd.

The International Trade Awards 2010-11

Great Eastern Impex Pvt Ltd.

Vijay Logistics Pvt Ltd.

Alfa Supply Chain Solutins Pvt Ltd.

Third Fold Here

GLUE

Please complete the following & get a quick effective response from suppliers: 1. Your company’s business function is ( one only) Wholesalers Manufacturer Distributor Agent Other, please specify ______________ 2. Your role in your company’s buying process can best be described as: I buy I identify potential suppliers I approve purchases I negotiate contracts I select suppliers.

3. Your line of business 4. Specific product requirement Name: Designation: Company Name:

City:

Pin:

Tel:

Fax:

Email:

05 / 2011

Address:

‘A’ Wing, Ruby House, J. K. Sawant Marg, Dadar (W) Mumbai 400 028, INDIA.

INFOMEDIA 18 LIMITED SPECIAL PROJECTS - SMART LOGISTICS POSTAGE WILL BE PAID BY ADDRESSEE

BR Permit No. 555 Bhavani Shankar Post Office, Mumbai 400 028.

Business Reply Inland

NO POSTAGE STAMP NECESSARY IF POSTED IN INDIA