VIEWPOINT
GETTING A BANG OUT OF YOUR BUCK EACH year, billions of dollars are spent on moving products around the world. With smart logistics, you can move products faster and save your company money. And here, when we say smart logistics, incidentally it is a verb and not a noun. We all know the four main logistics cost drivers are information, inventory, facilities and transportation. Supply chain and logistics optimisation is neither easy nor cheap, but it is the biggest opportunity for most companies to significantly reduce their cost and improve their performance. As per experts, for most supply chain and logistics operations, there is an opportunity to reduce cost by 10% to 40% by making better decisions. Optimising the supply chain involves satisfying or exceeding customer demands, at the lowest operating cost. While this is generally true, there are organisations that move to a higher cost facility network to provide the best level of customer service. This is seen in the growing trend to have more, smaller distribution centres located closer to an organisation’s end customers. With a growing number of companies acquiring other businesses having distribution centers, another network trend is consolidation. With so many factors involved in deciding how many facilities to operate, where to locate them, what customers to serve from each, what inventory to store where, and what size to make each facility, there is a growing need for organisations to understand the basics of supply chain optimisation. Certain philosophies’ and practices like the objectives for cost optimisation must be quantified and measurable; the models thus deployed towards this cause must faithfully represent required logistics processes. Then again, the variability must be explicitly considered (incorrect factorisation of this often leads to errors in model results and poor supply chain & logistics decisions). In this tech-driven world, data speaks. Hence, data must be accurate, timely and comprehensive; and staying with technology, integration and automatic transfer of data is critical. Solutions provided by supply chain and logistics optimisation models are not successful unless people in the field can execute the optimised plan and management can be assured that the expected RoI is being achieved. The human interface of technology (people), must have the domain and technology expertise required to support the models, data and optimisation engines and the process must support optimisation and have the ability to continuously improve. There are many interesting sounding approaches around. The one that caught our fancy and incidentally, is also part of this edition is called ‘Crawl-Walk-Run Approach’. As the saying goes, ‘it is easiest to crawl before walking’. The same is true for any business change, especially for technology initiatives that enable key business decisions. When it comes to price optimisation, an approach that allows a retailer to move in a stepwise fashion towards full price optimisation can often be prudent, avoiding a ‘big bang’ type approach. This allows the business to build an understanding over time, and ultimately build faith and trust. Plus, the associated costs can be spread over time and investment evaluated at each stage. With all this and more in this edition, have a great read and as the cover shouts, ‘let’s cut cost and not corners’, as therein lies our edge!
Archana Tiwari-Nayudu archana.nayudu@network18publishing.com
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CONTENTS IN CONVERSATION WITH ‘Our Vision Is To Provide Best In Class IT Infrastructure To The Indian Logistics Sector At An Affordable Cost’
VOL. 03, NO. 08
NOVEMBER 2012
TIPS & TRICKS
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Cost-effective Strategies A Win-win Solution For Retailers & Consumers
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Amar More, VP – Logistics Practice, Kale Logistics Solutions Pvt Ltd
EVENT REPORTS
SPECIAL FOCUS: COST OPTIMISATION
Engineering Expo Ahmedabad 2012 Optimising Cost Taking The Path To Smarter Logistics
Winning Formulae Resounding The Success Saga
Best Practices 10 Golden Rules For Supply Chain Optimisation
28 31 34
Epitomising Entrepreneurial Excellence
Panel Discussion: Gujarat Flying High With Successful Strategies
6th Express Logistics & Supply Chain Conclave A Holistic Approach To A Demand-driven Supply Chain
APPLICATION ZONE Monomer Ethylene Packaging Made Easy
ALSO IN THIS ISSUE
36
Devising A Framework For Agile Supply Chain
Tool To Achieve Round-the-clock Efficiency
37
Luring Indian Shopaholics
Krishnapatnam Port: Exhibiting Sea Trade Excellence Air Cargo Forum India: Soaring High On The Aviation Front
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TECHNOLOGY & INNOVATIONS Cutting-edge Solutions
RETAIL Tempting Deals
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NEWS ANALYSIS
SHIPPING Transportation Planning & Execution
5
VIEWPOINT NEWS, VIEWS & ANALYSIS Latest Happenings In The World Of Logistics
FMCG Safety Stock Management
54 56 57
PRICE TRENDS EVENT CALENDAR TENDERS PRODUCT UPDATE PRODUCT & ADVERTISERS’ INDEX PRODUCT & ADVERTISERS’ INQUIRY FORM
22 23 53 58 59 64 65
CASE STUDY Disaggregated Manufacturing Supply Chains Leveraging On The Global Advantage
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Looking For A Specific Product?
STRATEGY Efficient Transport Spend Management Key To Long-term Savings
People, Processes And Partners 3Ps To Success
Cover Illustration: Sachin Pandit
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Searching and sourcing products were never so easy. S Just type SL (space) Product Name and send it to 51818
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APEEJAY-EREDENE CAPITAL JV TO SET UP NINE LOGISTICS PARKS IN INDIA WITH its Haldia Logistics Park now thrown open, Apeejay Infralogistics Pvt Ltd (AILPL), a 50:50 JV of Apeejay Surrendra Group and the UK-based PE fund Eredene Capital, seems well set to come up with its second logistics park in the east-Kalinganagar Logistics Park. The two logistics parks promise to provide a one-stop facility for dry EXIM (export-import) cargo and manage the clients’ entire supply chain logistics. The LSE-listed PE fund actually has an agreement with the Kolkata-headquartered Apeejay Group to develop nine infrastructure and logistics projects across the country. The British PE fund is looking at raising $200-300 million from overseas markets to meet its investment requirement for the Indian infrastructure sector. Karan Paul, Chairman of the over `6,000 crore, Apeejay Surrendra Group, said that the first phase of the
recently launched Haldia Logistics Centre, would house a container freight station to handle over 4,000 containers and would include 60,000 sqft for EXIM bonded warehouse. While the Haldia unit has entailed an investment of `200 crore, the Kalinganagar unit will come up with a capital outlay of `50 crore, he said. Paul claimed that the Haldia property spread over 90 acre is the first park in the eastern region, which has CFS facility, state-of-the-art domestic warehouses (80,000 sqft), hardstand storage, open yard storage (240,000 sqft) and weighbridge facility, along with other modern facilities. The 30 acre Kalinganagar Park will house 120,000 sqft of domestic and contract warehousing and 175,000 sqft of open storage and project cargo. The Kalinganagar complex will have a capacity to handle over 2,500 containers for EXIM and will
PORT OF HALIFAX INKS MoU WITH PANAMA CANAL AUTHORITY THE Halifax Port Authority became the first Canadian port to sign an MoU with the Panama Canal Authority. The MoU was signed with a purpose to identify business opportunities, increase awareness of the ports, exchange information and undertake joint marketing initiatives. With the Panama Canal expansion nearing completion, large ships will soon have another route option available to and from North America and the Port of Halifax.
GATI KAUSAR TO RAMP UP REEFER FLEET TO 350 by 2015. As part of its restructuring strategy, Gati had, in 2011, acquired Delhi-based cold chain company Kausar (India) Ltd, which offers both cold and ambient supply chain solutions. “Gati Kausar’s Gati posts net loss of `7.8 crore business strategy will in July–September quarter focus primarily on organised Gati Ltd recently reported a net retail, including food loss of `7.79 crore for the quarter chains, pharmaceuticals, ended September 30. The company had dairy products, agro products a net profit of `4.5 crore in the same and FMCG,” Gati said in period a year ago, the company said in a statement. a filing to the BSE. “Exceptional items The company is also betting comprise of loss on sale of an old cargo big on the express distribution ship,” it added. and supply chain segment.
GATI Kausar, a cold chain transportation solutions subsidiary of Hyderabad-based Gati Ltd, is planning to increase its reefer fleet (refrigerated trucks) from the current 162 to 350
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have covered a warehouse of over 250,000 sqft in addition to hospitality, commercial and retail space. Ranveer Sharma, MD, Eredene Capital, said, “Our projects will provide first-class infrastructure with superior service and will play a key role in the development of logistics infrastructure initially in the eastern region. Over the years, Apeejay Surrendra Group and Eredene have developed a deep working relationship and our projects would demonstrate our strong execution capability to deliver highclass infrastructure projects.” Designed as gateways, through which companies can manage their entire supply chain logistics, the first two logistics parks would provide multi-functional facilities for storage, distribution, transportation, ancillary support services and trade facilitation, all under one roof for end to end logistical support.
GAIL INKS DEAL TO USE HALF OF PETRONET’S DAHEJ CAPACITY ADDITION PETRONET LNG Ltd is set to expand its Dahej terminal in Gujarat from 10 mt to 15 mt, has booked half of the planned capacity addition with Gail (India) Ltd. The pact was inked recently in return for an interest-free advance from GAIL, to be invested in the project. The expansion would cost an estimated Rs3,000crore and is expected to be completed by 2015. Petronet has said that the advance from Gail would account for 30% of the equity the company needed to invest in the expansion. The company has signed an agreement with GAIL for giving them a capacity of 2.5 mt of the 5 mt expansion planned at Dahej. This has been done on the ‘use or pay’ basis. The company has booked their volumes and GAIL will have to use or pay.
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STARTREK LOGISTICS IS NOW SPOTON - ENGINEERED FOR ACCURACY INDIA Equity Partners (IEP), a leading, independent, controloriented private equity firm based in Mauritius—having acquired the domestic road express business of TNT India in December 2011 and operated it as Startrek Logistics— recently unveiled the new service logo and brand for the business. Hereafter Startrek Logistics Pvt Ltd will operate with the service brand as ‘SPOTON - Engineered For Accuracy’. Abhik Mitra, MD, SPOTON & Platform CEO, IEP – Logistics Investments, said, “Nine months after having acquired the business, we have now given birth to a new brand – SPOTON. It has been an exciting journey resulting in the successful transition and growth of the business.” SPOTON is represented by three colours—orange, green and white, similar to the Indian flag. The logo incorporates a network with a parcel at its centre signifying the integral customer and service-centric focus with the backing of a well-organised network. Mitra added, “The logo can also be interpreted wherein the parcel is delivered accurately and on-time consistently with quality at every step. We believe the core value of our brand is ‘The System is the Service’,
where the system is our network of people, processes, infrastructure and technology all baked into one identity.” Sid Khanna, Chairman and KK Iyer, MD, IEP, said, “This acquisition has been positive in many aspects. Beginning with the speed and quality of the transition and separation, the implementation of the new IT system, and now, the launch of a new service brand. We see strong potential in express logistics and will continue to make investments in this segment.” The organised road express industry is currently worth about `2,500 crore. Of this, about 70–80% is held by 3–4 players such as Gati, Safex and SPOTON, among others. Dilip Sharma, COO, SPOTON, said, “Our tagline - Engineered for Accuracy, will differentiate the brand, which focusses on the most critical aspect of customer expectation: Accurate Delivery. The implementation of the new logo and brand will be immediate in all our collaterals and communications. Branding and livery on our trucks and people will also be immediate in key markets like Mumbai, Delhi (NCR), Bengaluru, Chennai, Kolkata and will be rolled out in a phased manner across our entire network in the weeks/ months to come.”
SHARJAH-BASED GROUP PROPOSES TO DEVELOP AZHIKKAL PORT SHARJAH-BASED Universal Lubricant Group is keen to develop Azhikkal Port in Kannur and has already earmarked `150 crore for the project. The company was looking at handling cargo such as plywood, lubricants and base oil at the proposed facility. The company has already sent its investment proposals to the government and also participated in the recently concluded Emerging Kerala Investors’ Meet showing interest in taking up the project under PPP mode. The facility is proposed to be
developed in two phases—the first involving an investment of `75–80 crore to be completed in over three years. Once developed into a fullfledged port, the company can also use the facilities at Azhikkal for the export of base oil and oil lubricants. The State Government has initiated the development of the port based on recommendations by consultants. It has reportedly acquired 4 acre of land for the project. Currently, the port has a 225-metre wharf along with truck-mounted cranes.
LUCAS INDIAN SERVICE PARTNERS WITH VECTOR CONSULTING GROUP TO REVAMP ITS SUPPLY CHAIN VECTOR Consulting Group has entered into a multi-year engagement with Lucas Indian Service (LIS) to build an agile supply chain using the principles of Theory of Constraints. Through the Theory of Constraints, LIS intends to provide a high availability in supply chain, while reducing overall inventory. This will be achieved by switching from forecast-based inventory movement to consumption-based inventory movement. “Most auto supply chain in the spare parts distribution is based on the forecast-based push methodology, which result in very high stocks while having stock outs. Consequently, distributors have low inventory turns. As a result, the distributors restrict range and reach resulting in lose-lose situation for both the distributor and the supplier,” said Kiran Kothekar, Founding Director, Vector Consulting Group. “Vector Consulting Group will be the implementation partner for transforming the supply chain of Lucas Indian Service using the TOC principles. The solution will help Lucas Indian Service to improve supply chain responsiveness by maintaining inventory levels in line with the actual consumption levels. The solution will result in substantial improvements in availability of spare parts offered by Lucas Indian Service at the point of sale while reducing inventory in the system significantly,” said Sandeep Abbi, President, Lucas Indian Service Ltd.
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DHL SUPPLY CHAIN ANNOUNCES INVESTMENT OF €100 MILLION TO STRENGTHEN LOGISTICS INFRASTRUCTURE IN INDIA DHL Supply Chain, the global market leader for contract logistics solutions, recently announced an investment of €100 million to further strengthen its logistics infrastructure in India. This will include the development of eight world-class Multi Client Sites (MCS) across India and upgrading its current fleet with technologically advanced transportation vehicles to meet the growing customer demands from various sectors. The new MCS facilities will add a further 5 mn sqft of warehousing space, and will be located at prime cities such as, Mumbai, Gurgaon, Delhi (NCR), Bengaluru, Nagpur, Chennai, Kolkata and Ahmedabad. “In 2010, the Indian logistics market was at $82.1 billion, with a projected growth of 9% in 2011. With government investments in infrastructure on the rise coupled with the streamlining of regulatory policies, we are enthusiastic about the fast-paced growth in the logistics market,” said Paul Graham, CEO – Asia Pacific, DHL Supply Chain. “DHL is strongly committed to investing in markets of growing importance. Looking to 2015
and beyond, India, China and other emerging markets are expected to be the key drivers of growth. With these new warehouses and our continued investment, we are taking another step in the right direction to pursue DHL’s global strategy and support Indian business development,” he added. The eight new MCS sites of DHL Supply Chain in India have been designed to enhance speed-to-market, with operational processes being optimised to improve efficiency and reduce costs. Built along DHL global standards, these MCS facilities include loading docks and dock levelers, RFID technology for barcode scanning and fully secured warehouses equipped with CCTV, intruder alarms & traffic management systems. “By setting up world-class infrastructure and improving our existing network of facilities in India, we will be in a strong position to meet the increasing logistics and warehousing needs of corporates in India,” said Oscar de Bok, CEO – South and South East Asia, DHL Supply Chain.
SRI LANKA KEEN TO INVEST IN INDIAN PORT PROJECTS FOR the first time, Sri Lanka has shown interest to invest in Indian port projects. The Sri Lanka Ports Authority (SLPA), which is controlled by the Sri Lankan Government, is reportedly in touch with Indian port companies and plans to form a consortia for the purpose. According to sources, SLPA has identified projects in India for investment and is considering bidding for a number of upcoming projects.
OM FREIGHT FORWARDERS OPENS OFFICE IN GERMANY AS part of its expansion plan, Mumbaibased, Om Freight Forwarders Pvt Ltd, has opened an international office in Germany. The company already has offices in China, Hong Kong and the UK. According to company officials, the company has been doing good business with Germany for the last 15 years. The decision to start an office
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in Germany was made taking into consideration the fact that it is a gateway to the whole of Europe and also the continent’s largest logistics market offering the right environment for expanding business and investment. Germany is also the world’s second largest exporting nation and the third largest importer of goods and services.
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CARGO TRAFFIC AT MAJOR PORTS UP BY 2.4% IN AUGUST SURGE in the handling of containers, coking coal and petroleum products led to the increase in cargo traffic at major ports by 2.4% in August. While Ennore Port’s traffic rose steeply by 35% due to a 19.5% increase in thermal coal handling, JN Port saw a record rise of 4.8% year-on-year during the month due to a surge in container volumes, a report said. Mumbai Port witnessed a 12.8% rise in throughput in August on account of a 30.9% jump in Petroleum, Oil and Lubricants (POL) consignments. POL volume was also remarkably higher at Kandla Port, which handled 4.8 million tonne in August. With a rise of 23% in fertiliser cargo, traffic at Kandla Port rose by 7.1%. However, volume fell on a yearon-year basis at Visakhapatnam Port due to reduced handling of POL, of 1.1 million tonne in August as against 1.7 million tonne in the corresponding year-ago period. Iron ore traffic too fell, by 40.4%, resulting in an 18.6% fall in the Port’s throughput. Iron ore handling fell across all the major ports, due to the ban imposed on overseas shipments, to a cumulative 1.2 million tonne from 3.7 million tonne a year ago. Also, cumulative traffic volume at major ports declined by 3.5% during the April–August period. However, volume at Ennore Port during the first five months of the fiscal year shot up by 29.1%. VO Chidambaranar Port, Cochin Port, Mumbai Port, JN Port and Kandla Port also fared well during the five months. On the other hand, the April– August volume declined at Kolkata, Paradip, Visakhapatnam, Chennai and Mormugao Ports, according to Indian Ports Association data.
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GMR LAUNCHES AIR FREIGHT SERVICE FOR INLAND CONTAINER DEPOT GMR Infrastructure and Container Corporation of India (CONCOR) recently launched a dedicated air freight service for an Inland Container Depot (ICD). The airlines will now be accepting cargoes at the ICD itself and all prior custom clearances and claim of duty drawback will also happen at the container depot, according to a statement issued by GMR. “It will not just cut down on the cost and time involved in shipping, but will also reduce the multiple handling of air cargo, thus ensuring better protection and minimal transit risk of the cargo items,” PradeepPanicker, Chief Commercial Officer – Aero of Delhi International Airport, said in the statement. According to the statement, Bonded
Trucking Service will be used for transiting goods between ICD Kanpur and Delhi Airport. All prior custom clearances and claim of duty drawback will now happen at the facility itself. This is the first time in the history of air cargo in India that the airport, airline, ICDs, customs and customers have joined hands to offer such a unique service at a location. As per the statement, the first truck, which was dispatched with a load of 1.6 tonne, was linked to Cathay Pacific and Emirates airlines at Delhi Airport. Stating that Kanpur, at present, exports about 500 tonne of air cargo every month and imports about 115 tonne/ month, the statement said that opening of air freight service is expected to increase demand further.
DP WORLD TO DEVELOP A NEW CONTAINER TERMINAL AT JEBEL ALI DP World is to expand capacity at a new 4-million-TEU container terminal at Jebel Ali, to be operational in 2014. According to reports, the terminal will have a 1,860-metre quay, 17 metre alongside and would be able to accommodate 18,000 TEUs. It will also have a 70-hectare storage yard, 19 quay cranes and five rail-mounted gantries. The design, construction and commission and equipment of the terminal has been awarded to a joint venture of Japan-based TOA Corporation and SoletancheBach.
AGILITY OPENS NEW WAREHOUSE IN HONG KONG AGILITY has recently opened a new 13,000-sqmt warehouse in Hong Kong. The warehouse is located in the Yuen Long District of Hong Kong, close to the border with mainland China. There is direct highway access to the Kwai Chung container terminals and Hong Kong International Airport is 40 minutes away by road. The location is also in close proximity to the future sea bridge infrastructure project connecting the regions of Pearl River Delta, Macao and Hong Kong. The showcase grade ‘A’ logistics centre will provide customers in Hong Kong and South China with optimal storage and handling facilities, including dust-free and static-free zones for electronics components
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and climate-controlled areas for temperature-sensitive products. Among various features of the centre, what might act as an advantage for the company is an average high ceiling clearance of 8.2 metre to cater to five-tier storage racking systems and one independent bay for every 460 sqmt of storage floor area. Other unique features include handling activities are on a single-level structure, eliminating the traditional local market reliance and practice of cargo lift access, and the corresponding restrictions on efficiency. The new facility will enable them to consolidate many of their operations under one roof, helping them improve efficiency and drive down supply chain costs, according to the company.
TRUCK MOVEMENT IN INDIA SLOWER THAN GLOBAL AVERAGE ACCORDING to recent research findings, trucks in India move at half the average global speed. While the average speed in the country is 25–35 kmph, the global average stands at 60–80 kmph. The average distance covered by a truck in a day in India is 250 km, while the global average is about 400–450 km. Inadequate capacity, insufficient funds and project delays have added to problems in the Indian transport sector. The World Bank’s International Logistics Performance Index Global Ranking pegged India at the 46th position among the 155 countries featured. The ranking measures logistics competitiveness of a country across 6 parameters— Customs, infrastructure, international shipment, logistics competence, tracking and tracing, and timeliness. While logistics cost in India— about 14% of the GDP—is higher than the global average, it stands at about 10% for BRIC nations and less than 8% for developed ones.
KHALIFA PORT STARTS COMMERCIAL OPERATIONS ABU Dhabi has started commercial operations at its new Khalifa port, a project that transfers the bulk of container terminal handling from the 40-year-old Port of Mina Zayed.The new Khalifa facility, built on reclaimed land 5 km off the coast, recently received its first ship from a commercial customer. The completed first phase, which cost $7.2 billion, has an annual capacity of 2.5 million TEUs and will be able to handle an additional 12 million tonne of general cargo. Capacity is projected to double to five million TEUs in 3–5 years.
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LLOYD’S REGISTER ANNOUNCES BREAKTHROUGH IN CONTAINERSHIP CAPACITY ADVANCED R&D indicates that container stacking weights can be modified to allow the carriage of more cargo. In an 18,000 TEU design, the increase in cargo weight could be as much as 10%, said Tom Boardley Marine Director, Lloyd’s Register. The benefits are lower costs, lower emissions and a lower carbon footprint. “The results come from looking hard at ship efficiency – how can we optimise designs? Clearly, there has been scepticism over many ship efficiency claims and much of the problem comes down to lack of common approaches to measurement, so you end up comparing apples with oranges. But the work that we have been doing in examining the forces involved in container stacks is throwing up some really interesting and innovative results,” added Boardley. According to Boardley, these results indicate clearly that the company will be able to allow much higher cargo weights and enable more operational flexibility—and to do this in safety.
The potential in cargo increase is considerable. “We are helping the owners reduce risks and further reduce uncertainties in container stowage planning and operations. We have been carrying out a broad range of investigation and re-formulation of calculations into operational ship accelerations and ship motions. This is not just mathematics—real containers have been load tested at full scale and ships have been instrumented; we have been modelling the impact of our new insights for the larger 16-18,000 TEU designs now emerging & looking to possibilities in future, for next generation 22,000+ TEU ships,” he said. “It’s not about more container slots – it’s about being able to load more containers that are carrying cargo and being able to have more options as to where to load. This can help speed up cargo operations, reduce time in port, energy used and drive increasing asset efficiency ashore and afloat,” Boardley said.
DB SCHENKER INKS DEAL WITH IBM FOR BETTER MANAGEMENT OF ASIA-PACIFIC SUPPLY CHAINS DB Schenker has signed a fiveyear, multi-million dollar agreement with IBM for managed services and business resiliency for its transport and logistics Information Technology (IT) systems and operations across 20 Asia-Pacific (APAC) countries. According to an official release, the engagement will help DB Schenker improve its IT operational efficiency, offer enhanced supply chain services to support its customers and ensure better responsiveness & resilience. DB Schenker manages freight and supply chains for the world’s leading companies across diverse sectors such as automotive, electronics, industrial, consumer, healthcare, aerospace, chemicals and more. With over 2,000 locations in the world’s most important economic regions,
DB Schenker’s logistics and supply chain network operates on a 24x7 mission-critical basis, which requires the highest degree of reliability, efficiency and security. In the dynamic and fast-growing APAC region, DB Schenker operates in an environment where customers’ supply chain operations are becoming increasingly sophisticated amid a highly diverse and complex regional economic landscape. Hence, the ability to calibrate the optimum supply chain and IT strategy set-up is a definitive and compelling advantage. To do this, DB Schenker set out to build a robust systems platform that is able to support an extended enterprise, including its customers and their supplier network, to be agile and resilient in a volatile global marketplace.
FEDEX TO OPEN NEW $100 MILLION AIR CARGO HUB IN SHANGHAI FEDEX recently announced plans to open a $100 million air cargo hub in China’s commercial centre of Shanghai. US-based FedEx Corp. signed an agreement with Shanghai’s airport operator to set up the international express and cargo hub to be completed in early 2017, according to a company statement. “Demand for FedEx shipping services, both to and from China, is expected to increase. By expanding our infrastructure in Shanghai, we will be equipped to handle increased volumes in Asia,” said Michael Ducker, chief operating officer of FedEx Express, the express delivery arm of the group said in the statement. The hub will also help service trade between China’s developed eastern coast and the United States and Europe, according to the statement. The new FedEx hub at Shanghai’s main international airport, Pudong, will triple the capacity of its current facility, by processing up to 36,000 items an hour, the statement said. FedEx now serves Shanghai with 68 flights a week, it said.
TIGER LOGISTICS & EAGLE LOGISTICS JOIN HANDS FOR SRI LANKA MARKET TIGER Logistics recently signed an exclusive agreement with Eagle Logistics, a major player in the logistics sector in Sri Lanka, who are also involved in warehousing and distribution. Tiger Logistics that is already very strong in the Indian Subcontinent and in Sri Lanka, where it moves close to 300 TEUs every month, expects its volumes to double as both companies are focussing strongly on the IndoSri Lanka trade lane. In the coming months, both companies are expected to grow in this burgeoning sector.
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NEWS, VIEWS & ANALYSIS L A T E S T
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PORT OF HAMBURG REPORTED TOTAL THROUGHPUT OF 65.8 MILLION TONNE IN THE FIRST SIX MONTHS OF 2012 trade originated from container cargo, IN SPITE of a problematical 19% from bulk goods and 2% from economic environment in Europe and conventional general cargo. slackening off in the China trade that is of such particular importance for Primarily, foreign trade with nonthe Port of Hamburg, both on general EU-countries proved very strong. and bulk cargoes, Germany’s largest “Compared to the other ports in universal port achieved a positive result Northern Europe, Hamburg has gained —at 46 million tonne, general cargo additional market shares. Today’s cargo throughput was up by 3%, while bulk handling results demonstrate once goods at 19.8 million tonne reported again how the German export economy 2.2% growth. and the Port of Hamburg benefit from In the first six months of 2012, the Port of Hamburg reported a total throughput of 65.8 million tonne (up 2.7%). At 45 million tonne or 4.4 million TEU (20-ft standard containers), the container throughput that predominates in Hamburg as a universal port achieved a gain of 1.9%. The reason for this relatively modest growth was the total for empty containers, whereas the throughput of loaded containers grew up by 4.7% to 3.8 million TEU. Weaker growth rates compared to the 2011 first half are explained by the unusually strong growth achieved at that time. The main factor underpinning growth for the Port of Hamburg in the first half of 2012 were exports. “Today, and, in future, the Port of Hamburg as a location of industry and logistics plays an The main factor underpinning growth for the Port of important role for the economic Hamburg in the first half of 2012 were exports. development of the coastal region. It is not yet possible to predict how each other,” said Jens Meier, MD, far the current economic situation will Hamburg Port Authority. On the have effects on our port. However, I import side, first-half volume in the assume that the main part of German Port of Hamburg totalled 37.5 million imports and exports will still be tonne, representing a 0.1% increase. handled by the German seaports,” said First-half containerised general Frank Horch, Senator for Economics, cargo throughput in Europe’s second Traffic and Innovation, Hamburg. largest container port in 2012 reached Around 97% of the Port of 45 million tonne, representing Hamburg’s total first-half growth 3.3% growth. Here again, exports was attributable to exports. In the at 22.8 million tonne produced a first six months of the year, volume distinct increase of 6.3%. Imports of here reached 28.4 million tonne, containerised general cargo totalled representing a 6.4% advance, whereas 22.2 million tonne and were thus 79% of the distinct growth in outbound slightly (0.5%) up on the same period
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of the previous year. “Against the background of downward adjustments to forecasts for world trade and economic trends in our core markets, by the end of this year we are reckoning with a total throughput of around 135–136 million tonne, and hence, an increase gain in the order of between 2% and 3%. For the year 2012 as a whole, container throughput will bring us growth of between one and two percent,” added Claudia Roller, CEO, Port of Hamburg Marketing. In the first half of 2012, the trend in container throughput with the Baltic region was once again very positive. A distinct increase of 9.5% was reported here, with volumes reaching 1.0 million TEU. The Russia trade that is of such importance for Hamburg, especially, accounted for very significant growth with a gain of 14.7% to 317,000 TEU. “With Russia’s accession to the WTO in the middle of this year, trade barriers will successively be further dismantled. The Port of Hamburg, being closely linked with the Russian market, will also profit. For the Port of Hamburg, Russia is meanwhile its second most important trading partner in the container trade. Altogether, 595,000 TEU were transported to and from Russia via Hamburg in 2011,” said Roller. On exports of bulk cargoes, the grab cargo sector proved especially strong, with exports of fertilisers at 1.3 million tonne representing a gain of 14.6%. Primarily consisting of grain, suction cargo throughput was also up by 3.5%, and so the export total was positive. Altogether, 1.3 million tonne of suction goods were exported in the 2012 first half from the Port of Hamburg. With 1.2 million tonne (up 10.3%) of oil products being handled in the first half, exports of liquid cargoes also made good progress.
KRISHNAPATNAM PORT NEWS ANALYSIS
Exhibiting Sea Trade Excellence Krishnapatnam Port recently opened its world-class Integrated Container Terminal—KPCT, which has a total investment of nearly US$3 billion. The facility has all-weather container terminals with an initial planned annual capacity of 1.2 Mn TEUs that is extendable up to 6 Mn TEUs. The facility’s strategic location offers it scope to serve both the Eastern & Western parts of the world. In all capabilities, it is poised to help the Indian shipping industry grow at a faster rate and make it ‘world ready’. PRATEEK SUR
IN India, ocean freight represents a considerable percentage of the shipping industry’s revenues. It plays a crucial role in facilitating international trade, especially for high cost & value products that fall under perishables. Connecting India with the Eastern and Western parts of the world, Krishnapatnam Port, one of the most advanced and largest ports in India, recently opened the gates of its world-class container terminal for trade. Recognised as one of the world’s finest ports, Krishnapatnam Port will kick start the operations of its modern container terminal, which will bring about a paradigm shift in the Indian
Container Terminal operations. Set to boost its capacity to 6 million TEUs per annum within the next few years— handling the highest container volumes ever on the east coast—this state-ofthe-art, all-weather container terminal will be operational round the clock, 365 days of the year. Besides, the container terminal will offer maximum efficiency, minimum dwell time and maximum safety. Commenting on the same, Anil Yendluri, CEO, Krishnapatnam Port, says, “The launch of this world-class container terminal adds dynamism not just for Krishnapatnam Port but also to the Indian-international trade. Leading container lines are highly enthusiastic
to call at our terminal owing to the competitive tariff structure we offer.” Krishnapatnam Port is promoted by the Hyderabad-based CVR Group. Navayuga Engineering Company Ltd. (NECL) is the flagship entity of CVR Group and is a well-known EPC Company. CVR Group is highly diversified, has a turnover of US$1 billion and an order book of US$10 billion comprising of power, steel, port establishment, spatial technology & applications, IT and exports.
KPCT UNIQUENESS Strategic location The port is strategically located in
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Krishnapatnam port, continued
Andhra Pradesh’s Nellore district. However, Krishnapatnam Port is ideally set to boost trade not just in the vast hinterland comprising of Andhra Pradesh, eastern Karnataka, south eastern Maharashtra and northern Tamil Nadu, but it is going to be the central hub for international cargo between the countries located on the eastern hemisphere and India. The port has witnessed a total investment of nearly US$1 billion till date. World-class services and facilities Krishnapatnam Port is made to meet global standards and will provide world-class services and facilities to the entire shipping fraternity. This newgeneration greenfield port is equipped with the latest terminal operating system (NAVIS N4), which offers customised container services, singlewindow clearance system and a deep draft of 18 metres capable of handling the largest container vessels. Road and rail connectivity The port has outstanding road and rail connectivity. A dedicated 4-lane road connects the port with National Highway 5. A two-lane rail head provides rail connectivity from the port to the Chennai-Kolkata National Rail network. Congestion has been the key issue the industry is facing at several ports in the country. But, Krishnapatnam Port has effectively addressed this issue through excellent connectivity. Quick turnaround time The port ensures quick turnaround time and the container freight stations coming up at the port will help in seamless movement of container traffic to and from the port. Elaborating further, Yendluri adds, “We believe it will be a win-win situation for all stakeholders—including shipping lines, agents, freight forwarders and export/import community—due to the low dwelling and handling cost involved along with worldclass infrastructure already in place. Overall, Krishnapatnam Port will help accelerate the growth of this region as
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ACT
• KRISHNAPATNAM PORT COMPANY HAS WON THE MANDATE FROM THE GOVERNMENT OF ANDHRA PRADESH TO DEVELOP THE EXISTING MINOR PORT INTO A MODERN, DEEPWATER AND HIGH PRODUCTIVITY PORT, WITH A CONCESSION PERIOD OF 50 YEARS. • THE PORT IS BEING BUILT IN THREE PHASES AND IS POISED TO BECOME ONE OF THE BIGGEST PORTS IN THE WORLD AND THE LARGEST PORT IN INDIA. an industrial hub.” The terminal has also recently installed five super-post panamax cranes, with a 23-row span and each capable of lifting 65MT in twin mode. These cranes can handle the largest container vessels presently floating in the world.
OTHER TERMINALS REACH OUT The Bengal Tiger Line (BTL) feeder service will serve Krishnapatnam on a fortnightly basis. This service will rotate through Singapore-Port Klang-Chennai-Krishnapatnam-Port Klang-Singapore. The ‘Pull’ factor for the shipping lines to call Krishnapatnam Port is the incremental ocean freight that EXIM trade of Andhra Pradesh and Karnataka is willing to pay due
FACILITIES & EQUIPMENT AT CONTAINER TERMINAL • 2 berths, 1 more berth to be added later • Total berth length: 650 metres • Wharf: 650 metres (straight line); another 1,370 metres to be added later • Draft: 13.5 metres; to be increased to 17.5 metres • Capabilities of handling mother container vessels of up to 8,000 TEUs • State-of-the-art handling infrastructure with RMQCs, RTGs, reach stackers, etc. • Large container yard with reefer storage facilities • Rail siding details: On dock rail adjacent to CY • CFS facility within port limits
to their logistical savings. EXIM trade can use the world-class facilities of Krishnapatnam Port, which would result in significant savings in dwell time by way of faster turnaround of vessels, trucks, trains; thereby leading to cost saving. These savings would encourage EXIM trade to pay premium in ocean freight for their shipment to be executed from Krishnapatnam Port.
GLOBAL BENCHMARKS Currently in its second phase of development, this port is designed to be one of the biggest ports in the world. The port has established a world record for coal discharge of 1,22,247 MT, using the conventional system of coal unloading. This port has achieved a benchmark by loading 60,021 MT of iron ore fines in just 24 hours by using the conventional system of loading. Its master plan incorporates 42 berths with a total quay length of 12.5 km and draft of 20 metres, capable of handling 2,00,000 DWT super capsize vessels. It has a huge backup area of 6,500 acre for transit storage that will house a dedicated container terminal and import hub port for coal for the 14,000 MW power projects coming up in its vicinity, and export hub port for iron ore along with the capacity to handle fertilisers, petrochemicals, break-bulk cargo, project cargo and automobiles. In future, it will also have shipbuilding and repair facilities along with bunkering facilities which would be according to global standards. prateek.sur@network18publishing.com
NEWS ANALYSIS AIR CARGO FORUM INDIA
Soaring high on the aviation front With an aim to ensure growth and develop the Indian air logistics segment, airlines, freight forwarders, cargo terminal operators, integrators, courier & express operators, airport operators, customs house agents and several other associations, among the other stakeholders of the sector, have come together to form Air Cargo Forum India (ACFI). Being the country’s first forum representing the entire air cargo industry, ACFI will help the industry implement high standards and achieve operational excellence. ARINDAM GHOSH
THE aviation industry plays a vital role in the growth of the Indian logistics sector. The industry contributes 0.5% to the national GDP and around 30% of the total international trade (in terms of value) is transported by air. To further strengthen the industry’s progress, the Air Cargo Forum India (ACFI) has been recently launched by S Machendranathan, Additional Secretary & Financial Advisor, Ministry of Civil Aviation. Speaking on the occasion, Machendranathan comments, “The growth of the economy is likely to trigger the growth of the air cargo segment and will become an important part of aviation activities. I am glad that all the people involved in the value chain have come together to develop this forum and will work on issues that are critical for the industry.” According to Pradeep Panicker, President, ACFI, “The members of the forum have a representation from all segments of the air cargo supply chain. This forum will work as a catalyst to facilitate the growth of air cargo and will also work towards bringing economic efficiencies in the system.” The initiative also holds immense significance for the air cargo segment, which is expected to benefit with the
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government allowing 49% FDI in the industry. Moreover, the country’s air freight segment is set to expand to 8.5% per year for the next five years. Some of the founding members of the association include Celebi Delhi Cargo Terminal Management India Pvt Ltd (CDCTMIPL), Delhi Cargo Service Center Pvt Ltd (DCSC), Delhi International Airport Pvt Ltd (DIAL), DHL Express (India) Pvt Ltd and Jeena & Company, among others.
ROLE OF ACFI Presently, various streams of air cargo logistics have their respective trade bodies or associations that look into specific interests like BARIndia for airlines, Air Cargo Agents Association of India (ACAAI) for IATA-approved agencies, Federation of Freight Forwarders’ Associations in India (FFFAI) for freight forwarders and Customs House Agents (CHAs), Association of Private Airport Operators (APAO) for private airports, among others. The creation of ACFI will offer the entire air cargo logistics trade a common platform. Highlighting the difference between ACFI and other associations,
Panicker informed, “ACFI is an umbrella organisation that seeks to bring all the agencies on a single platform. The body also aims to align all the stakeholders towards developing a macro perspective and a focussed approach to counter the challenges by the entire air cargo segment while promoting the industry’s interest.” ACFI will proactively work with various trade and government agencies—including Customs, Ministry of Finance, Ministry of Commerce, Ministry of Civil Aviation, Director General of Civil Aviation (DGCA) and Bureau of Civil Aviation Security (BCAS), among others—on all major common issues of interest for the industry’s development. In addition, it has also invited other important associations and key stakeholders such as FFFAI, Express Industry Council of India (EICI), CHA, APAO, BAR and ACAAI, among others, to join them. Further, as part of the initiatives taken, the forum will strive to reduce the time for clearing of cargos at airports, which will lead to higher efficiency levels.
PROMOTING PAPERLESS TRANSACTION: A MAJOR OBJECTIVE Given the rising levels of awareness
growth of the industry, he affirms. on the importance of conserving association is on developing energy, a major objective of the body industry-specific committees and Further, the association can look to is to promote ‘go green environment sub-committees that will look at each bring in or engage with consultants on to achieve paperless transactions component of the logistics sector. behalf of the industry who can bring and environment-friendly cargo In order to streamline the entire in knowledge for the strengthening operations through e-trade, e-freight logistics chain, these committees will the value chain. Ajay Sahai, Director and cargo community system in identify various issues and operational General & CEO, Federation of Indian co-ordination with trade Export Organisations partners and government (FIEO), elaborates that the The members of ACFI have a representation agencies’. Today, the forum needs to look into from all segments of the air cargo supply chain. This forum will work as a catalyst to facilitate the total cargo handled at some of the major issues such growth of air cargo and will also work towards Indian airports has grown as high logistics cost and bringing economic efficiencies in the system. 3.5 times in the last 15 transactional cost of exports. Pradeep Panicker, President, ACFI years from 0.68 Million If these rates come down, Metric Tonne (MMT) it will provide exporters in 1995–96 to 2.39 MMT in immense relief. He informs that FIEO challenges that are faced by each 2010–11, i.e., a CAGR of 8.7%. There is will work together with ACFI to tackle industry. Expounding on the initiative, huge scope to conserve energy by these issues. However, Sahai urges the VGS Mani, Director – Logistics, bringing in paperless transactions, association to be proactive rather than Nokia, informs that the company with the rising levels of freight. The being an association which merely reacts handles about 60,000 tonne of air association is also taking various to situations. With such initiatives, the cargo in a year. This is a ‘brilliant’ initiatives to achieve the objective. country’s logistics sector is all set to soar step. He adds that he is happy to see high on the aviation front. the initiatives taken by the association to reduce the time for clearing cargo. REACHING GREATER HEIGHTS This is a very critical step for the The initial focus of the industry arindam.ghosh@network18publishing.com
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TECHNOLOGY & INNOVATIONS CUTTING-EDGE SOLUTIONS
Planning Tools For Maritime Shipping based on dynamic simulation. This there are only narrow time windows AS global flows of goods continue to helps pinpoint possible bottlenecks available for the work required. The rise, the demand also rises for available in the process. It also prevents media bulk of the available time is consumed port-related capacity and the logistics fragmentation, and thus double-entry simply transporting the components that goes along with it. This is true for of data, while accelerating the planning themselves. That’s why charge times new seaports in planning and existing process. The third component of the in harbour should be made as effective ones, too. The biggest challenge of all is system is the ship simulator. With the as possible. Ships and plants, material the large number of influences that have aid of this tool, local conditions of the and staff must be available immediately to be factored in—from roadways and harbour basin are virtually coordinated as soon as weather conditions permit dockside or gantry cranes, truck gates with navigational requirements. construction work on a wind park to or rail transshipping facilities to lay Because all three units are interlinked proceed. This means storage areas times or container capacities, and from through a database, each unit can access and lodgings at or in the immediate legal regulations to deadlines. Reliable the library of maritime building blocks. vicinity of the harbour, and direct ship decision-making calls for a capability access for heavy transports of to compare and assess different large components for the wind variations with preset key figures, turbines. “Taken together, these such as space requirements, factors generate a very specific the number of ground slots layout for this terminal. And what needed or CO2 emissions. For virtual planning can accomplish these requirements, researchers can be seen particularly in the at the Fraunhofer Center for handling requirements for large Maritime Logistics and Services components, and in the ways we CML in Hamburg have can represent and describe them. come up with the ‘Toolbased Visualising travel distances Rapid Planning Environment’ and turning circles also helps (ToolbaRPlannEr). This us update existing terminals,” modular software system Developers at the Fraunhofer Institute for Computer Graphics IGD in Rostock use ergonomics simulation software to Bosse points out. can efficiently work through Research make the ship come to life as a 3D model on the computer. complex planning tasks for seaports, port terminals, logistics areas ‘GREEN’ CONTAINER TERMINALS VIRTUAL REALITY ACCELERATES and transshipment centres in the CONSTRUCTION OF SPECIAL SHIPS The possibilities of this system are hinterland, so called ‘hinterland hubs’. extremely flexible, for instance, CML Another example of the potentials of staff drew up a concept study for a virtual planning is the construction of ‘green’ container terminal in the year special ships. Engineers must develop IDENTIFYING BOTTLENECKS 2030. After they modified a few of nearly everything from scratch, from “The ToolbaRPlannEr consists of the parameters, they were able to the bridge to the engine room. Often three components. The planning demonstrate that fuel consumption— many of the subsystems—such as the environment is composed of a multiand thus emissions as well—could be ship’s drive, ventilation, cooling or firetouch table with the aid of which reduced by around 12–15%. As CML extinguisher systems—are housed in variations can be planned and assessed employee Claudia Bosse explains, “Our tight quarters. These must be accessible in 2D and visualised in real-time in 3D. idea is to use electric drive for liftable, and easy to operate at the same time. A library of maritime building blocks driverless transport vehicles and multiDevelopers at the Fraunhofer Institute was also created in connection with trailer units that can transport several for Computer Graphics Research IGD this. Because the building blocks are containers at a time. We have also in Rostock use ergonomics simulation reusable, the variations can be planned relocated things such as railway tracks software to make the ship come to life much more quickly,” explains Dipl.-Ing. for direct transshipment using a new, as a 3D model on the computer. Thus, Robert Rauer of CML. Users can shift rail-guided gantry crane to a lower shipbuilders can evaluate new ship future buildings, facilities, roadways or level of the terminal.” designs, preventing errors before they even material flows at will. The future arise, and, most importantly, designing operator can also take a virtual tour of The system was also used to plan demanding superior special ships more these fields in the planning environment. a terminal for off-shore wind power quickly than before. The defined software interface permits plants. A problem with the erection exchange with simulation software to of wind parks is that work is impeded assess what was once static planning by severe weather and rough seas, so Courtesy: Fraunhofer Research
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PRICE TRENDS IRFI Trend for October 2012
The RFI stood at 177 points in the month of October 2012, which is 2 points higher in comparison to the corresponding period last year.
ZONAL FREIGHT TRENDS The overall freight rates have increased by 3.86% as compared to last month. The freight rates from Mumbai registered the highest increase of 5.41% in comparison to last month due to diesel hike in mid-September and heavy dispatch of vegetables mostly to the northern part of the country. The diesel price hike also impacted the freight rates from Delhi with an increase of 4.43%.
INDEX TREND FOR 5 YEARS: TRENDS FOR OCTOBER (Y-o-Y) 180 178 177
176
175
175
174 172 172
172
170 168 166 2008-09
2009-2010
2010-2011
2011-2012
2012-2013
COMMERCIAL VEHICLES DOMESTIC SALES: The overall Commercial Vehicles (CVs) segment registered a growth of 3.71% in April–September 2012 as compared to the corresponding period last year, while Medium & Heavy Commercial Vehicles (M&HCVs) registered a negative growth at -12.49%. Meanwhile, Light Commercial Vehicles (below 7.5 tonne) grew at 16.04%.
FORECAST FOR NOVEMBER 2012: The RFI in November 2011 was the same in comparison to November 2010. The freight rate in November 2012 is expected to increase significantly because of the recent hike in the prices of diesel and the upcoming festival season.
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
SMART LOGISTICS
APRIL 2010
NOVEMBER 2012 • SMART LOGISTICS • 23
IN CONVERSATION WITH AMAR MORE
THE JOURNEY SO FAR To say the least, the journey for Kale Logistics Solutions has been exhilarating so far. As you are aware, we are a technology company providing technology solutions to the global logistics sector. We have developed a major innovation for the Indian logistics sector viz., UPLIFT —a multi-modal cargo community system that integrates the supply chain processes of shippers, forwarders, customs brokers, carriers (air, sea, road), customs authorities, chambers of commerce, insurance companies to eliminate the duplication of work/inefficiencies in the supply chain and give seamless visibility of cargo (like in the developed nations), thus reducing the overall logistics costs, which, for India, stand at a staggering 13% of GDP. Today, more than 50% of India’s air cargo moves on Kale Logistics’ systems. We have an inspired team, which is looking to set new benchmarks in logistics automation. We provide solutions that help the administration-intensive logistics sector (freight forwarders, customs house agents, warehousing companies,
Our vision is to provide best in class IT infrastructure to the Indian logistics sector at an affordable cost “We will continue to focus on our cargo community system initiatives and will also work closely with policy makers to address the high logistics costs of this country through ‘right’ automation,” informs Amar More, VP – Logistics Practice, Kale Logistics Solutions Pvt Ltd, during an interaction with Nishi Rath. Excerpts… transport operators, airports, container freight stations, inland container depots) automate the internal business functions.
INFRASTRUCTURE: A MAJOR DRAWBACK You have hit the nail on its head. This is the No. 1 problem with external dependencies faced by LSPs. The
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transit times for supply chain planning are not predictable, due to congestions, there are serious costs locked in idle times, fuels and inventory; dwell times are still a far cry from the rest of the world and the quality of handling/storage/transportation still suffers due to inadequate infrastructure. Although we do not physically
move goods, we help our customers move the goods in the best possible manner within the given infrastructural constraints. Let’s face it. The infrastructural constraints are not going to go away any sooner; it is a slow and painful process. We need to come up with some out-of-the-box solutions to address these issues. Taking cognisance of this need, in
partnership with the Air Cargo Agents Association of India, we have embarked on one of the most ambitious initiatives ever for the Indian logistics sector. We understood that in this very high cost of logistics (13% of India’s GDP), between 5% and 10% of the logistics costs comes from administration/ paperwork. In order to overcome the physical infrastructural constraints, we have to look at the use of VIRTUAL (IT) infrastructure. For example, if we could establish visibility of cargo across the supply chain, i.e., if the manufacturer knows where exactly the shipment of raw materials or finished goods is, then the buffers in inventory can be reduced, thus reducing overall inventory costs. Similarly, the data that moves along with the shipment (for example, the origin, destination, shipper’s name and address, consignee’s name and address, commodity) today is entered and then printed in multiple systems by multiple parties, thus resulting in additional administrative costs. Through UPLIFT, we provide our customers with a platform where data that is entered by one party on the platform on a shipment need not be re-entered (it can be reused), thereby eliminating paperwork. Thus, we are helping our customers reduce the dwell times of cargo and inject more efficiencies into their supply chains, thus partially overcoming the constraints imposed by physical infrastructure.
COST OPTIMISATION STRATEGIES ADOPTED We are helping our customers optimise various costs through automation, some of these are: • Inventory costs: By having better visibility of shipment across the supply chain (as explained above) • Data entry costs: By delivering EDI solutions to our customers that help them reduce data entry by re-using the data supplied by a customer or supply chain partner
CREDENTIALS Amar More heads the Product Strategy and Business Development function at Kale Logistics Solutions (P) Ltd. He is the first Indian recipient of the ‘CILT International Young Achiever Award’ given by the prestigious Chartered Institute of Logistics and Transport International and is the only individual globally to receive this honour on account of his exemplary contribution in delivering technology solutions to the logistics sector. He is an accomplished professional with over 15 years of experience in setting up new initiatives, practices, processes, business analysis and enterprise-wide application development. He has been driving strategies behind key business areas of Kale Logistics Solutions. Amar is leading the creation of India’s first mutli-modal cargo community system (UPLIFT) and has led in the past several supply chain visibility / automation initiatives for the freight forwarding, airlines, airport cargo terminal operators and container freight station industries. He works very closely with associations like CSCMP and CILT, which are committed to delivering excellence in logistics. His passion is to bridge the technology gap between different logistics sectors across the globe. Prior to joining Kale Logistics, Amar has worked in various capacities at Keane Consulting (a multi-billion dollar organisation) and India’s premier business conglomerate – the Tata Group. The foundation of his excellent domain expertise is his rich educational background with a Bachelor’s Degree in Electrical Engineering and an MBA in Supply Chain Management.
• System costs: We provide the technology platforms that do not require customers to have servers, software for running our systems, the system is provided on pay-asyou-go basis • Communication costs: Using our solutions, customers have reduced follow-up phone calls, faxes, couriers • Paper handling costs: With seamless industry platform, the need for paper printing is only on a must-print basis, thus handling the paper generation and storage costs • Service failure costs: By having systems that prevent failures by giving alerts rather than reporting failures, thus we reduce the costs of service failure and customer attrition. We know that the above costs form a major chunk of the logistics costs and by using the strategies mentioned above, the same can be optimised.
RISING COST OF FUEL While it does not directly affect our
business but it does so indirectly as it reduces the spend on technology. We offer our customers technology solutions that will help them manage their transport fleet in the most efficient manner. We also help them cut other administrative costs to balance the impact of rising fuel costs on their business.
GROWING DEMAND FOR 3PLs This goes without saying. The concept of 3PLs is very pertinent to growing economies. The core activity of a manufacturer is producing the goods, his expertise in moving the goods is limited. Hence, it is crucial that this very important function of supply chain is outsourced to experts who, thanks to the experience of dealing with multiple customers, partners, commodities and regulatory agencies, can definitely do a much better job of managing the logistics than what a trader or a manufacturer can do. Like other developed countries, in India also 3PLs have been growing and will continue to grow. Provision of better infrastructure is, however, a critical
NOVEMBER 2012 • SMART LOGISTICS • 25
In conversation with, continued
UP CLOSE & PERSONAL
When not working... I prefer to spend time with my family and of course like almost every Indian on this planet I love to watch and play cricket. I have represented my college and past companies in professional cricket. But by finding more avenues of love, I mean my wife, kids and work; this avenue has suffered a bit. I like to read non-fiction (management books) and have tremendous curiosity in predictive sciences such as astrology.
Are you fond of gadgets? If yes, what was your latest purchase? Honestly, I feel outdated in the company of my friends. Although I toyed around with the tabs when they were just born, now the practicality is taking over the fancy and I am sticking to the traditional work-gadgets like my high end laptop and blackberry. Different types of GPS devices fascinate me. If not in this industry, you would have been into... Without doubt, sports…
GETTING AT PAR WITH DEVELOPED COUNTRIES Only two things can help India getting at par with other developed countries: • Improve physical infrastructure • Implement a virtual infrastructure to support the physical infrastructure to optimise logistics within the given physical constraints. If we do these two things, we can be in the league of the best countries. The first part is easier said than done.However, we are optimistic that the policy makers and logistics service providers would understand the importance of the second part, which is relatively easily achievable. We look forward to working closely with them.
FUTURE PLANS Your greatest achievement till date... Thanks to the Almighty, I have been conferred with ‘The International Young Achiever 2009’ Award by Chartered Institute of Logistics and Transport International—which is an international institute with 33,000 members working in over 100 countries. This award is given to professionals below 35 years of age who are doing significant work in the area of logistics. I got this award for my work in the technology space for logistics. I consider my biggest achievement in contributing to the creation of India’s first multi-modal cargo community system UPLIFT. I believe that this system will set new benchmarks for the logistics industry across the globe. We have already seen this dream getting into reality with the system transactions reaching close to a million in a very short span of time. Message to young and inspiring entrepreneurs... ‘Stay Hungry, Stay Foolish’ as the famous book says. If you believe in your idea, then the universe will conspire to make it successful. Execution is a tough game and will test your character but do not ever give up. Perseverance will get you success, no matter how difficult the path is. factor in determining the future of 3PLs in India.
POST-HARVEST SUPPLY CHAIN AND POOR WAREHOUSING: WOES OF THE AGRI-SECTOR India, I think, ranks very high in spoilage of agricultural produce. This is essentially due to bad planning and lack of infrastructure and most importantly complete lack of visibility of goods. Today, our administration does not know where the food stocks are & where is the matching demand and secondly the storage facilities for
26 • SMART LOGISTICS • NOVEMBER 2012
the food stock are well below par. Two things are absolutely essential—the state needs to invest in systems using which we can track the agricultural production and know exactly where the produce is and for how much time would it last there and also there is a need to map demand where through an online mechanism, the demand centres know the age, quantum & quality of produce and then consume the same. Moreover, there is a need to have more perishable handling centres to increase the shelf life of the agricultural produce.
Our vision is to provide best in class IT infrastructure to the Indian logistics sector at an affordable cost. It is a paradox that India being the IT back office of the world has the poorest IT adoption in logistics. We are providing the technology on software-as-aservice basis where the logistics sector need not invest big capital for an IT system, but just uses the pay-as-yougo model. We have made significant progress on the execution of our vision with over half a million EDI transactions already done by over 170 customers. We will continue to focus on our cargo community system initiatives and will also work closely with policy makers to address the high logistics costs of this country through ‘right’ automation.
MESSAGE TO YOUR COMPETITORS… Do not look at short-term gains, focus on the big picture. There is enough pie for all of us and we should work together (instead of getting into petty price wars) to make sure that we create the best logistics IT infrastructure in this country. nisi.rath@network18publishing.com
SPECIAL FOCUS OPTIMISING COST
NISHI RATH
WHILE customers demand improvements in each aspect at lower prices, producers and distributors in India are facing increasing competition. The traditional methods of supply chain design and management do not always apply in the Indian context, owing to its complex tax regulations, non-standardised transportation, uncertainties across the value chain and low rate of technology adoption. Nevertheless, those companies who have embraced these complexities and designed their supply chains in India to efficiently move products
warehouse among others). The second part sets out the environmental costs of using various means of transport. They are dependent on the number of runs of the means of transport, and on the environmental levy, which may depend on the use of fossil fuels and carbon dioxide emissions. The third component determines the cost of supply from the manufacturer to the distributor. Another component is responsible for the costs of supply from the distributor to the end user. The last component determines the cost of manufacturing the product by
of the supply chain, it is important to optimise locally to maximise your investments in critical resources like infrastructure, assets and technology. Third-party logistics (3PLs) providers Handing over the important part to a specialist and focussing on the organisations’ core competencies will help the business grow. One area that the world’s most successful companies attribute their success to, is outsourcing their logistics and supply chain activities/operations to 3PLs. Faced with increasing competition in the global marketplace, various
Taking the Path to Smarter Logistics Cost optimisation in supply chain and logistics is not easy, but it is the biggest opportunity for most companies to significantly reduce their cost and improve their performance. Designing an optimal supply chain configuration that can meet the expected growth rates is a challenging task, especially in India. But several players have come up with strategies to optimise the cost related to the supply chain to give the business an edge over others. from sourcing through fulfillment are reaping the rewards of the market size and growth potential that India offers. Changes in the global economy and the increasing globalisation lead to the widespread use of IT tools, which enables continuous, real-time communication between the supply chain links. One of the objectives is to optimise logistics and entrust it to specialised companies.
OPTIMISATION CRITERIA The objective defines the aggregate costs of the entire chain and consists of five elements. The first is the fixed costs associated with the operation of the distributor involved in the delivery (like distribution centre and
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the given manufacturer. Cutthroat competition has forced manufacturers to evolve or perish when it comes to optimising the processes as well as navigating the new tools and best practices for supply chain management. At any point in time, an optimised supply chain stays lean, manages costs and perhaps most critically, responds instantaneously to even minor fluctuations in demand. Acting locally Manufacturers should consider multiple channels and determine the optimal levels of inventory within the echelons of the supply chain process. This is also critical to consider carbon footprint levels and maintain a green supply chain. However, during the execution
companies worldwide are turning to logistics outsourcing as a way to increase profitability and gain sustainable competitive edge. According to Kiran Kothekar, Co-founder, Vector Consulting, in any typical supply chain, it is almost always a trend to send full truck loads in order to save cost of transportation. This essentially means that even if there is a requirement for partial truck load, companies end up sending full truck loads resulting in excess inventory. The situation get worse when the same material is required at some other location and is not available as it was sent in excess to the earlier location. “Under these circumstances, 3PLs can play a major role in today’s
mega-fleets of major national retailers world as they have been able to remove operations are slowly, but surely, giving as well as small as five or six vehicles. the above conflict,” explains Kothekar, way to more streamlined, mobile It is gaining momentum because of adding, “They collect partial loads processes that rely heavily on wireless its ability to not only cut costs but from various companies, consolidate devices and applications to operate also improve customer service. Route the loads and transfer the material in at peak efficiency levels around the optimisation links the professional full truck loads and then redistribute clock and around the world. Among experiences of a consulting firm with the material at various destinations. various mobile technologies, Global sophisticated software to improve a Even though they charge a premium Positioning System (GPS) vehicle company’s routing efficiency, while over conventional transporters, they tracking has rapidly gained popularity saving on bottom-line costs that include may prove cheaper if one views the among fleet owners as the technology fuel, equipment, maintenance and entire supply chain holistically, i.e., if becomes more affordable and easier to labour. The process involves finding one takes into account the savings on access. In general, GPS vehicle tracking a way to travel the fewest miles with account of balancing of inventory and utilises a space-based global navigation the fewest vehicles while still delivering reduced loss of sales.” satellite system to track time and quality service to the customer. location information for fleet vehicles. 3PLs offer services that can allow This information is then transmitted to businesses to outsource part of their Utilising mobile-based technology a remote user who can monitor vehicle routine logistics and supply chain Traditional logistics and supply chain location, speed, routing, idle time, management functions. The engine start-up and shut-down growth of 3PL companies has STEPS TAKEN BY DAMCO and much more. This information been driven by the need for TO OPTIMISE COSTS... can be used to improve a host of organisations to become leaner, fleet management operations, reduce costs and focus on core The company has developed a Supply Chain including the reduction of fuel competencies. Many organisations Health Check process wherein they review costs. According to a study are also increasingly identifying customers’ end-to-end supply chain in detail by Aberdeen Group, a market the non-core functions within from a cost and service perspective. The first step research firm, fleets with GPS the organisation and outsourcing in the process is to understand the customers’ tracking installed experience a them to increase flexibility and strategic priorities and, on that basis, derive a 13% reduction in fuel costs on operational efficiency and improve supply chain strategy that supports the overall business goals. average. customer service levels. As an example, if a company is looking to serve According to Erling Johns Warehousing its customers more quickly and better, the Nielsen, Global Head – Supply Another such technology that solution might be to use a faster (and more Chain Development, Damco, has helped cut down on cost is expensive) mode of transportation, invest more in “Involve your 3PLs in the process. RFID. The RFID system can be IT and process improvements. For a company that They run hundreds of supply applied to the cargo management is looking at cost reductions, the solution might chains across different industries of intelligent warehouse. It can be to allow a slightly longer lead time in exchange and geographies—at least if process the cargo to go into storage for lower cost. we talk of 3PLs with a global and leave the storehouse and the As part of the process, DAMCO benchmarks footprint. This means that 3PLs stock management. Moreover, it customers supply chains from a financial and have access to best practices at an can also supervise and manage all operational perspective with industry peers. By operational level. In the process, the information about the cargo. comparing KPIs such as inventory turns, cash to make sure that you openly At the same time, to introduce cash cycle times, number of ports used (=supply communicate your business the RFID technology to the chain complexity), container fill rates and objectives & share the operational logistics management field, it can transport mode mix potential improvement areas are identified. data needed to perform a health effectively save the artificial cost, check on your supply chain and enhance the work’s accuracy, The end-to-end supply chain is then broken down by process & activity from a lead time, cost and take active part of the process. guarantee the product quality, inventory perspective. Different scenarios are Garbage in, garbage out very accelerate the processing speed. modelled using advanced supply chain much the rule here as well.” Additionally, the cargo with tags simulations tools in close collaboration with the on them can effectively avoid Route optimisation customer. Once the preferred scenario is selected being stolen, damaged or lost by It is one tactic that helps cut fuel an implementation & change plan is prepared using the read-write equipment and other transportation costs and and objectives for a successful implementation is in logistics management centre. is growing in popularity. It is an agreed and subsequently tracked. Nielsen adds, “The best way to approach being adopted by the
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Optimising cost, continued
reduce warehousing costs is to consider whether you can bypass the warehouse. Is it possible to deliver directly to customers? Can you do the value-added services at origin instead? Another approach is to determine whether you can reduce the level of inventory and thereby the space requirements in your warehouse. Is it possible to substitute inventory with information (= virtual inventory) through a closer alignment between demand and supply and/or through better planning and supply chain visibility tools.” The biggest cost element in warehousing is the cost per sqft of the warehouse, i.e., the cost of space of the warehouse. The space of the warehouse is directly proportional to the amount of inventories required to be held to service the demand. The level of inventory, in turn, is directly proportional to four factors—level of demand, Replenishment Lead Time (RLT) of inventory from the source location, variability of demand and variability of replenishment lead time. Elaborating further, Kothekar informs, “Of these four factors, RLT is the most crucial factor as apart from having a direct impact on the level of inventory, it also has an indirect impact as the lesser it is, lesser is the variability of demand in the reduced RLT and lesser is the variability of RLT itself. Therefore, in order to bring about cost optimisation in warehousing, supply chain must find ways to reduce the RLT as much as possible which will mean lower level of inventories and thus lower space requirement. Trying to bring about cost optimisation in warehousing in any other way may result in loss of sales.” Reverse logistics This refers to the flow of returned goods by the customer to a state where the product is disposed of, repaired, recycled or internally consumed. These days, because of the strict norms pertaining to disposition of goods, this is a very strategic area. Typically, companies recycle most of
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MAJOR CUSTOMER BENEFITS End-to-end supply chain diagnostics Total-cost-to-serve optimisation Benchmark against industry peers Direction on improvement scenarios Benefit realisation from conceptual development to operational execution Logistics cost reductions of up to 20%, including indirect costs the returned goods as part of the Value Recovery Model. But there is a huge cost involved here as there has to be a proper disposition process for parts which can harm the environment. A potential solution to this problem is consuming the parts for internal use after the necessary repairs. This reduces the additional cost of recycling the product. Also, this saves additional money in terms of deploying a brand new product for internal use.
DESIGNING A SUPPLY CHAIN NETWORK A conventional approach to supply chain design does not work in India given the complexity involved. What is required is both a solid knowledge of operating realities and innovative approaches to optimisation. There are a few key considerations for designing a supply chain network, either by using a third-party network optimiser or by building an in-house mathematical model. These include: Demand points and product SKUs aggregation: Given the large number of end customers and SKUs sold by a manufacturer, considering each customer and product combination for modeling the footprint might lead to several million variables. However, in most cases, only a few key customers and product categories impact the supply chain footprint and the rest can be safely ignored. Another approach to reducing the problem size is to aggregate products (and customers) based on certain important factors like
weight, volume, etc. The right level of aggregation allows the underlying model to remain fairly accurate while, at the same time, making it computationally tractable. Planning horizon and granularity: The complexity in the optimisation process can be significantly impacted by the planning horizon and the granularity of demand (whether demand is being modelled in weeks, months or quarters). Higher granularity captures factors like seasonality of demand, but, at the same time, increases optimisation complexity. Modelling potential manufacturing locations and warehouses: The number of variables in a network design model will approximately be the product of the number of manufacturing locations, warehouses, customers, products and number of time periods. To enhance the solvability of the model, the number of possible manufacturing and warehouse locations for a greenfield project can be significantly reduced by dividing the geographical region into grids of a pre-determined size. Each grid can then be evaluated based on political stability, infrastructure, customer & supplier proximity, labour availability, taxes and regulations to yield a filtered list of possible locations.
BEWARE OF TRENDS & CUT DOWN COST Though the complexities of the Indian supply chain appears overwhelming at times, understanding and mastering them is a critical success factor for an organisation attempting to serve its customers in India. Choosing how you get your company’s products from one point to another is one of the most important decisions you can make and when it involves cutting down on cost, it is a hard task. But to maximise the company’s profits, it is important to stay abreast of current trends in the industry. nisi.rath@network18publishing.com With inputs from Deloitte
WINNING FORMULAE SPECIAL FOCUS
Resounding The
Success Saga Achieving cost reduction in logistics is a continuous effort irrespective of the changing parameters and variables. Nobel laureate Winston Churchill once said: ‘Success is not final, failure is not fatal: it is the courage to continue that counts.’ Here are four success stories of four different companies that highlight some distinct winning formulae...
SUPRITA ANUPAM
Image Courtesy: acteos.com
Successful companies like CEVA Logistics, United Parcel Service (UPS) and DB Group are continuously cultivating their methodologies on ‘how to reduce the cost further’, using their enormous data sources, vast experience and world-class state-of-the-art technology. Apart from the three, Hitachi Transport Service, Japan, with its subsidiary company, Flyjac
Logistics, is trying to implement their latest technologies with a carefully blended flavour of demand and cost effectiveness knowing the pros and cons of India & Asia-Pacific. In the following pages, we will find that the four companies have their distinct strategies that might not seem cost-effective in the present, but will encash in the near future.
CEVA Logistics: Making A Difference CEVA Logistics with its unique world-class technologies and methodologies, which integrate transportation, inventory management, financial settlement and e-commerce applications increasing visibility to the customers with reduced cost. By integrating all the trading partners in the supply chain, it achieves real-time visibility of inventory, order and shipment status, thus optimising the distribution network, improving customer services and generating cost savings.
HANDLING EXTERNAL PRESSURES WITH A PLANNED HOLISTIC APPROACH At a time when in many logistics firms, external pressures have led to downsizing of staff, supply chain contractors being harder hit. CEVA has delved into the facts and actions to maintain and improve the tough efficiency challenges
being set by the regulator. Sean Kelly, Sr GM (the UK & Ireland’s industrial sector), CEVA, explains, “Cost reduction remains a priority for modern utilities. Price control, changes in regulation, weather patterns, and environmental pressures make a big impact on the sector. Our research shows that maintaining the status quo is not an option and how the supply chain can often be the catalyst to helping modern utilities respond to external pressures. A planned holistic approach towards end-to-end supply chain management can deliver significant cost and performance efficiencies from procurement and stock management right through to operational delivery on site.” “The benefits of a more efficient and leaner supply chain need to be realised if supply chains are to be successful. Our expertise in the utility sector includes working closely with energy, water, gas and oil companies to develop practices designed to deliver cost savings, productivity
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Winning formulae, continued
improvements and minimise losses,” adds Sean.
OPERATIONAL EXCELLENCE COMES WITH IN-DEPTH KNOWLEDGE To achieve operational excellence, CEVA Logistics has developed certain strategies to cater to all the external pressures such as Global Standard Matrix in conjunction with local benchmarks to achieve efficiency, quality, safety and customer satisfaction; Zero Defect start up, a project management strategy to optimise the cost factor right from the planning to reverse logistics solution. To reduce cost further with an improved quality in supply chain, CEVA has adopted process-driven approach
combined with its industry-specific expertise that brings forth the most appropriate logistics solutions. The processdriven approach comes with: An in-depth knowledge of logistics: This includes machinery & equipment, products and intermediates, utilities, aerospace/ marine/rail and warehousing & distribution Integrated services: This includes transportation booking and execution (multi-mode), customs brokerage and documentation, freight consolidation and deconsolidation, and freight insurance Optimising inventory throughout the supply chain: Vendor managed inventory, inventory financing continuous replenishment and inventory optimisation.
United Parcel Service (UPS): Driving Efficiencies And Cost Control Having over 400,000 employees spread across 200 countries and territories, the ninth largest airline in the world, and world’s largest non-governmental database, United Parcel Service (UPS) has taken a few more steps (apart from the commons) to control the supply chain costs with a few modifications that lead to significant cost savings.
ENRICHING THE SOLUTION WITH CUSTOMISATION & OPTIMISATION One of the big steps that have been taken by UPS was optimisation via customisation. For example, healthcare logistics services are more concerned with regulatory compliance (.65 priority), while cost reduction falls second (.6 priority). UPS does customise its solutions in accord with demand priorities.” Concerns around regulatory compliance and cost management have been constants for healthcare supply chain decision makers over the past five years, while we have seen growth around areas such as product security and product protection, companies can experience a positive impact by examining strategies such as increased collaboration, adopting segment-based supply chains and leveraging new innovative models and technologies,” says Scott Szwast, Marketing Director – Healthcare, UPS.
SAY NO TO CTRL+P UPS has deployed a new combination scanner and paperless printing device from HP that will print millions of sorting labels directly on packages, helping the world’s largest delivery company reduce operational costs, while slashing its consumption of paper. The step not only reduces the
paper cost but is also a green approach towards saving trees, thus making the firm eco-friendly. Dave Barnes, Sr VP & CIO, UPS, explains,”Leveraging technology innovation is critical in today’s tough, competitive economy. The new HP handheld device means increased efficiency and effectiveness at a lower cost with less waste. This is a perfect example of how technology helps to drive business solutions at UPS.” By eliminating paper labels, it is expected to save 1,350 tonne of paper each year once the imprinter is fully deployed and also save millions of dollars in annual operating costs.
UPS SMART PICKUP UPS Smart Pickup is one in a series of UPS’ ‘Decision Green’ efforts and is designed for customers who want the convenience of a scheduled pickup, but who may not ship a package every day. The service uses UPS technology to ensure that a UPS driver stops at a customer location to pick up a package only when a package is, in fact, being shipped. This new service is expected to eliminate 8 million miles from the total driven by UPS each year in the US and will save an estimated 793,000 gallons of fuel and 7,800 metric tonne of CO2 emissions. David Barnes, Chief Information Officer, UPS, says, “UPS’ service integrates the company’s operational and customer-facing technology to eliminate unnecessary stops. UPS Smart Pickup is particularly compelling for customers who are interested in cost-effective ways to make environmentally responsible choices, while, at the same time, helping UPS reduce miles and lessen its carbon footprint.”
Deutsche Bahn AG: Sustainability Is The Key Factor The DB Group’s logistics services are mostly dependent on its largest owned private rail network. Thus, the company offers many advantages—lowest possible cost, faster service than that of road, secure and reliable service and so on.
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Deutsche Bahn operates more than 30,000 trains daily on its approximately 36,600 km-long, modern rail network. In addition to internationalising the network of all transport modes, DB is also focussing on developing end-to-end
training and development programme. It will help develop professional and personal skills with specific targets in mind.”
travel and logistical chains across all modes of transport. The company thus meets the changing requirements of the markets, which are increasingly demanding efficient and environmentally compatible services from a single provider.
GREEN APPROACH
The company firmly believes that today’s sustainable/green approach might be tomorrow’s big cost optimisation technique. ECO WAREHOUSING Stepping ahead with the The company has introduced mantra, companies have taken climate-friendly warehouses several steps to empower their on a worldwide scale as a Figure 1: Eco-warehousing Concept equipment with a renewable proactive response to the climate Courtesy: Deutsche Bahn source of energy. Along with the change. These warehouses use eco-warehouses, DB trains are powered by green electricity geothermal, solar and waste heat recovery for their energy generated by a total of 33 wind turbines. Dr Karl-Friedrich needs, which are not only sustainable in nature but also Rausch, Member – Management Board, DB Mobility cost-effective. Logistics AG (responsible for transportation and logistics) & Chief Sustainability Officer, DB Group, informs, “We ESTABLISHING OWN LOGISTICS ACADEMIA intend to cut our specific CO2 emissions by 20% over To cater to the unskilled manpower, further wastage of time and money on the field, the company has established its 2006 levels by 2020. We have quickly been able to reduce logistics academy to train its employees. Dr Thomas Lieb, our specific CO2 emissions, thanks to optimised capacity Chairman – Management Board & CEO, Schenker AG, utilisation, new technologies for vehicles, terminals equipped avers, “Establishing our own academy is one of our solutions to be environment-friendly and training in energy-saving to this problem. The academy is first and foremost an internal driving techniques.”
Flyjac Logistics: Localising Indian Market Priorities The Indian logistics market is still young and shares only 9% of market value. As compared to the developed countries, 3PL contribution in overall logistics activity in India is at a nascent stage. Flyjac Logistics Pvt Ltd, a subsidiary of Hitachi Transport System operating its services in India, is trying to localise its methodologies to reduce cost with maximum customer satisfaction. Ranjit Kadia, Regional Manager, Flyjac Logistics, explains, “Cost is being incurred at different levels and controlled by an aggressive competition. Hence, there is no particular methodology available for the costing of logistics activity. We may refer to Chart 1 for the components of logistics costing.”
Chart 1: Components of Logistics Costing
Few key decisions are usually taken from the principle: Increasing market share of logistics companies Investment in logistics infra Consolidation of primary warehouses Bulk buy Effective ERP. Following scope is available with impacting Service Level Agreement and Environment Health and Safety: • Proper space utilisation: ASN and Mini-max level of inventory is require from principal • Adequacy in manpower: Cutoff time and milestone • Proper handling of material: Awareness among down the line people and first level supervisor • Common expenses: Sharing the common area expenses with principal. Kadia avers, “We are sure of a change in numbers by opting for the above mention components and still believe that costing is not a dynamic context… We need more sync between the customer and the 3PL to optimise the scope. 3PLs are being paid as reimbursement and actual cost considered at manufacturer/trader. Hence, they need mature environment to explore it.” • • • • •
suprita.anupam@network18publishing.com
NOVEMBER 2012 • SMART LOGISTICS • 33
SPECIAL FOCUS BEST PRACTICES
SUPPLY CHAIN and logistics optimisation is neither easy nor cheap but it is the biggest opportunity for most companies to significantly reduce their cost and improve their performance. For most supply chain and logistics operations there is an opportunity to reduce cost by 10% to 40% by making better decisions. Over more than 30 years of developing and implementing supply chain and logistics technology, H Donald Ratliff, Executive Director and Regents Professor, Supply Chain & Logistics Institute, Georgia Tech, has found the following 10 rules to be essential requirements for success:
1
OBJECTIVES MUST BE QUANTIFIED AND MEASURABLE
Objectives are the way that we specify what we want to accomplish with logistics optimisation.
of labour. These costs are both quantified and reasonably easy to measure.
2
MODELS MUST FAITHFULLY REPRESENT REQUIRED LOGISTICS PROCESSES Models are the way we translate operational requirements and constraints into something the computer can understand and use in algorithms. For example, we need models to represent how shipment can be combined into loads for a truck. A very simple model such as the total weight/volume of the shipment will faithfully represent some loading requirements (e.g., bulk liquids). However, if we use a total weight/volume model for loading new cars on a car hauling truck, many of the loads that
3
VARIABILITY MUST BE EXPLICITLY CONSIDERED
Variability occurs in almost all supply chain and logistics processes (e.g., travel time varies from trip-to-trip, the number of items to be picked at a DC differs from day-to-day, the time to load a truck varies from truck-to-truck). Many of the models associated with supply chain and logistics optimisation either assume that there is no variability or assume that using average values are adequate. This often leads to errors in model results and poor supply chain and logistics decisions. Ignoring variability is generally a receipt for failure. Variability must either be explicitly considered in the models or the supply chain and logistics practitioners must have the expertise to explicitly consider variability in interpreting model results.
10
Golden Rules For Supply Chain Optimisation
Companies have made tremendous strides in automating transaction processing and data capture related to supply chain and logistics operations. While these innovations have reduced costs by reducing manual effort, their greatest impact is yet to come. They are the essential enablers for optimising supply chain and logistics decisions. Here’s presenting 10 golden rules for supply chain optimisation that will offer logistics service providers a competing edge…
This, in turn, is how the computer determines whether one solution is better than another and management determines if the optimisation process is providing acceptable ROI. For example a delivery operation might define the objective to be—minimise the sum of the daily fixed cost of assets, the per mile cost of fuel and maintenance, and the per hour cost
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the computer thinks will fit cannot actually be loaded while loads that the computer discards because it thinks that they will not fit may actually fit and be better than the ones selected. Hence, in the latter case, the model does not faithfully represent the loading process and the loads developed by an optimisation algorithm are likely to be either infeasible or sub-optimum.
4
DATA MUST BE ACCURATE, TIMELY AND COMPREHENSIVE
Data is what drives supply chain and logistics optimisation. If the data is not accurate and/or it is not received in time to include it in the optimisation, the resulting solutions will obviously be suspect. For optimisation that focusses on execution, the data must also be comprehensive. For example,
having the weight of each shipment is not sufficient if some loads are limited by volume of the truck.
5
INTEGRATION MUST SUPPORT FULLY AUTOMATED DATA TRANSFER Integration is important because of the large amount of data that must be considered by logistics optimisation. For example, optimising deliveries from a warehouse to stores each day requires data regarding the orders, customers, trucks, drivers and roads. Manually entering anything other than very minor amounts of data is both too time consuming and too error prone to support optimisation.
6
DELIVERY MUST PROVIDE RESULTS IN A FORM THAT FACILITATES EXECUTION, MANAGEMENT AND CONTROL Solutions provided by supply chain and logistics optimisation models are notsuccessful unless people in the field can execute the optimised plan and management can be assured that the expected ROI is being achieved. The field requirements are for simple, unambiguous directions that are easily understood and executed. Management requires more aggregate information regarding the plans and their performance against key performance benchmarks over time and across facilities and assets. Web-based interfaces are becoming the medium of choice for both management and execution.
7
ALGORITHMS MUST INTELLIGENTLY EXPLOIT INDIVIDUAL PROBLEM STRUCTURE One of the biggest differentiators among supply chain and logistics optimisation technologies is the algorithms. An irrefutable fact regarding supply chain and logistics problems is that each has some special characteristics than must be exploited by the optimisation algorithms in
order to provide optimum solutions in reasonable time. Therefore, it is critical that (1) this special structure be recognised and understood by the analyst setting up an optimisation system; and (2) the optimisation algorithms being used have the flexibility to allow them to be ‘tuned’ to take advantage of this special structure.Since logistics optimisation problems have a huge number of possible solutions (e.g., for 40 LTL shipment there are 1,000,000,000,000 possible load combinations), failure to take advantage of special problem structure means either that the algorithm will pick a solution based on some rule-of-thumb or that the computational time will be extremely long.
8
PEOPLE MUST HAVE THE DOMAIN AND TECHNOLOGY EXPERTISE REQUIRED TO SUPPORT THE MODELS, DATA AND OPTIMISATION ENGINES Optimisation technology is ‘rocket science’ and it is unreasonable to expect it to function well over time without at least a few ‘rocket scientist’ to insure that the data and models are correct and that the technology is working as designed. You cannot expect acomplex set of data, models and software to be operated and supported without considerable effort from people with the appropriate technical and domain knowledge and experience.
9
PROCESS MUST SUPPORT OPTIMISATION AND HAVE THE ABILITY TO CONTINUOUSLY IMPROVE Supply chain and logistics optimisation requires a significant ongoing effort. There is invariably going to be change in logistics problems. This change requires systematic monitoring of data, models and algorithm performance not only to react to change but to initiate change when opportunities arise. Failure to put into place processes to support and continuously improve logistics optimisation invariably results
in optimisation technology being either poorly utilised or becoming ‘shelf-ware’.
10
ROI MUST BE PROVABLE CONSIDERING THE TOTAL COST OF TECHNOLOGY, PEOPLE AND OPERATIONS
Supply chain and logistics optimisation is not free. It requires significant expenditures for technology and people. Proving ROI requires two things: • An honest assessment of the total cost of optimisation • An apples-to-apples comparison of the solutions being produced by optimisation versus benchmarked alternatives. There is a strong tendency to underestimate the ongoing cost of using logistics optimisation technology. If the total cost of logistics technology decreases after the first year, it is likely that the solution quality is decreases proportionally. It is seldom the case that the ongoing annual cost of effectively utilising logistics optimisation technology is less than the initial cost of the technology. Determining the impact of optimisation technology requires: • Benchmarking with regard to key performance indicators before implementing the technology • Comparing the results from optimisation to the benchmarks • Performing regular audits of optimisation performance. Few companies today know how well their supply chain and logistics optimisation is actually performing and how to determine their most significant opportunities for improvement. This is both the greatest challenge and the biggest opportunity for the next generation of supply chain and logistics optimisation technology. H Donald Ratliff, Executive Director and Regents Professor, Supply Chain & Logistics Institute, Georgia Tech Email: don.ratliff@gatech.edu
NOVEMBER 2012 • SMART LOGISTICS • 35
APPLICATION ZONE MONOMER ETHYLENE
also optimise the complete SCM.
INITIAL HURDLES
Image courtesy: www.newswise.com
It is easy to get ethane directly from methane as per the chemical reaction (by dehydrogenation reaction) in labs, but difficult to get the same at a larger scale. The direct conversion meets several hurdles (such as stability of methane gas). Further, ethane is a midproduct of the dehydrogenation reaction of methane. Hence, once the reaction starts, it becomes difficult to stop it. That way we get ethane along with several unwanted byproduct making the whole process too inefficient to afford. Now, methane can be converted to synthesis gas and then to methanol, which can be turned into ethylene.
ENCASHING ON THE OPPORTUNITY
Packaging Made EASY Honeywell’s new one-step conversion process from natural gas to monomer ethylene has grabbed the attention of supply chain providers as disruptive methodology for packaging. Ethylene (ethane) being symmetrical is more integral to the supply chain. Here’s analysing its effect over LSPs… SUPRITA ANUPAM
POLYETHYLENE (PE) is one of the most common polymers used for packaging a wide variety of products, Ethylene, on the other hand, has been used as base monomer in the packaging world for long time. While the current ethane processing is an energy-intensive and indirect method, requiring repeated heating and quenching steps that produce many chemical compounds, the new Honeywell process appears to opt for a more direct route from methane to ethylene using less energy. As the cost of natural gas is at an alltime low, the Honeywell process might result into some relief for Logistics Service Providers (LSPs).
GAME CHANGER FOR PACKAGING AND OTHER POLYMER CONSUMERS The process developed at Honeywell
36 • SMART LOGISTICS • NOVEMBER 2012
will allow companies to make ethylene—the substance from which plastic and other materials are created—from methane—major component of natural gas. According to Rajeev Gautam, CEO, UOP, “This will basically for the first time take natural gas and directly convert it into a chemical, not through a multistage process. At this point, we have enough proof of principle and testing done that you can probably detect the excitement in my voice.” The reduced cost of ethane production will encourage decoding more formulae for packaging material composition, corresponding fibres, polymers so far left behind. Being the first and foremost step of the supply chain execution, the process will not only stabilise the cost factor but will
Cashing in on the opportunity, many companies are keen to invest and collaborate with Honeywell for the same, Dow Chemical Company has recently announced that the company will construct a new world-scale ethylene production plant at Dow Texas Operations in Freeport, TX. “For the first time in over a decade, natural gas prices are affordable and relatively stable, attracting new industry investments and growth and putting us on the threshold of an American manufacturing resurgence. Constructing this new ethylene cracker at Dow Texas Operations will create a long-term advantage for our downstream businesses and for our company as a whole, and the benefits will accrue not only to Dow but to the state and national economy,” said Andrew N Liveris, Chairman and CEO, Dow Chemical Company. Honeywell’s one-step process using natural gas would save about 40% from the cost of ethane-based ethylene production at current prices, which will be a huge plus factor for supply chain management to cover more of the ecofriendly norms and standards. suprita.anupam@network18publishing.com
SAFETY STOCK MANAGEMENT FMCG
Devising A Framework For Agile Supply Chain In today’s dynamic global economy, with highly fluctuating demand for products, managing inventory has become even more challenging. Within inventory, safety stock management has always been a dilemma for supply chain professionals. The key questions that haunt inventory management professionals include whether to keep any safety stock and how much safety stock to maintain to prevent, lost sales & minimise inventory carrying costs, among others. Addressing all such concerns, here’s providing a framework for planning and managing a flexible safety stock. INVENTORY management has always been a challenging task for organisations selling numerous products and buying raw material to make those products. An important aspect of inventory management is when and how much to order. Traditionally, inventory management experts have calculated a fixed Economic Order Quantity (EOQ) that minimises the cost of ordering and keeping stock. Some organisations use fixed Maximum and Minimum Order Quantity (MOQ), which ranges around EOQ for stocking various parts. These quantities are ordered at a specific stock level called the Reorder Point (ROP), which is calculated as the stock level required to meet the demand for the finished product and the raw material, taking into account the time required for supply replenishment after the order has been made. The time taken for replenishment is called lead time. ROP works well when a manufacturer knows beforehand the exact demand and lead time for procuring a product. However, knowing them with precision would be equivalent to solving all the problems within the supply chain. Demand can remain constant, varying or determinable, but in most situations, demand is uncertain. In an ideal case, when we know the demand and lead time, our ROP)
will be: ROP = d*l, ‘d’ being demand during lead time ‘l’. However, there is always an error in forecasting demand and predicting lead time. Thus, relying on the above calculation could lead to inventory stock-out and an inability to meet customer demand. This can have an adverse effect on customer loyalty. This is why companies guard against this uncertainty by maintaining extra inventory, traditionally referred to as safety stock. In this case ROP = d*l + SS, where SS is the level of safety stock, ‘d’ and ‘l’ are estimation of demand and lead time and the multiple is called Demand During Lead Time (DDLT). The terms ‘safety stock’ and ‘buffer stock’ are used interchangeably, with
a slight semantic difference. Buffer stock prevents the producer from being unable to meet customer demand; whereas safety stock helps the producer to meet variations in the supply of raw material. Here, the word ‘safety stock’ is used to refer to both upstream safety and downstream buffer stock. Thus, safety stock guards against variations in demand ‘d’ and variations in supply lead time ‘l’.
A NECESSARY EVIL Safety stock is sometimes referred to as a necessary evil. Higher safety stock than required can block capital and increase operational costs; whereas low or no safety stock can lead to lost sales and customer dissatisfaction. Figure 1 enumerates the impact of
Figure 1: Impact of High & Low Safety Stock Manufacturers High Safety Stock
•
• • Low Safety Stock
• • • •
Retailers
High safety stock distorts true store demand, thus category management and related efforts are less accurate and effective High costs of maintaining inventory Excessive capital tied up in inventory
•
Low safety stock reduces the impact of promotions Leads to irregular ordering from retailers Loss of brand loyalty and brand equity Out-of-stock encourages competitors sales
•
•
• • • •
Operational costs increase as management of excess stock is required High safety stock distorts true shopper demand and thus decreases forecasting and ordering accuracy Increases possibility of stock outs Loss of revenue due to stock outs Decreased customer satisfaction Loss of store loyalty Competitor gains
NOVEMBER 2012 • SMART LOGISTICS • 37
Safety stock management, continued
high and low safety stock for manufacturers and retailers.
METHODS OF CALCULATING SAFETY STOCK Different companies have different methods to arrive at the safety stock number. These Figure 2: Lead Time Probability Curve methods can be distribution, (denoted as ơ) reveals the broadly classified under three spread of the error. In the statistical umbrellas: method, the concept of service level is Fixed Safety Stock used. In terms of business, it signifies Companies can set a fixed level of how many times, expressed as a safety stock for their goods. This percentage, a manufacturer can service number may be based on judgment the customer without facing stock-out. or calculations. This method may lead So, if no safety stock is kept, then as to high inventory costs or stock-outs per the curve, a company will be able since demand is not always constant. to serve customers 50% of the time Time-based Calculation during the lead time period. If a safety Time-based safety stock level is used stock of ơ is kept, then one will be to calculate the stock required over a able to serve customers 85% of the fixed period. In addition to the cycle time and if 2ơ is kept, then 98% of the stock (expected demand during lead time. Here the percentage time), usually a percentage or a day’s numbers—50, 85 and 98—denote average sales (or a week’s average service levels and the numbers 0, 1 and sales) is added. For example, if the 2 denote service factors. lead time is two weeks, a company In this article, analysts have used ‘Z’ may carry three or four weeks of as a function that converts the desired safety stock. This method also has service level into a service factor. a drawback, particularly when items Safetystock calculation by this method are slow moving as it can result in a is SS = Z*ơ. This is applicable when large amount of capital tied up in lead time is the same as the forecast safety stock. period. But that is not the case for the Statistical Calculation vast majority of the parts. So, in most The statistical method of calculation cases, a lead time factor is multiplied uses the normal curve or bell curve. in; this factor is calculated as the It assumes that the error between square root of the ratio of lead time the forecasted demand and the actual period ‘l’ and the forecast period ‘t’. demand follows a normal probability Thus, SS=Z*ơ*√(l/t). ROP comes to distribution. A normal distribution be ROP = d*l + Z*ơ*√(l/t). is characterised by two parameters— Until recently, inventory managers mean and variance. Since there is have just incorporated demand-side an equal likelihood that predicted variations, since the assumption has demand is greater or less than actual been that lead time is always known demand, the mean of the error and determinable. But supply-side distribution is assumed to be zero. variations expressed in terms of In the language of statistics, it is variation in lead time also need to be equivalent to saying that there is no taken into account. bias in forecasting demand. Unfortunately, the lead time does The variance of the normal
38 • SMART LOGISTICS • NOVEMBER 2012
not follow a normal curve distribution. A probability curve for lead time variation is depicted in Figure 2. Usually, the time taken to transport material is the same unless unforeseen circumstances arise. Therefore, in the distribution curve shown in Figure 2 the first crest represents the lead time when the product is available with the supplier and only transportation is required. There may be situations when the product is not available with the supplier. In that case, the product has to be manufactured by the supplier, which results in a greater lead time, as represented by the second crest. Depending on the service level that a company wants to achieve, a corresponding lead time in the curve above is chosen and used in the formula SS= Z*ơ*√(l/t), to calculate ROP and safety stock. Statisticians have developed many other formulae to calculate safety stock.
Figure 3: Basic Parameters for Calculating Safety Stock
These formulae usually incorporate the four parameters shown in Figure 3. The ERP systems widely used by companies also pick up values of these parameters from past data and use similar statistical formulae to yield a value of safety stock. In today’s business environment, relying on these parameters is insufficient. In fact, they may result in reorder points and safety stock levels that do not adjust to actual market demand or seasonality. There are many other factors that should be considered. Moreover, most organisations use a
Figure 4: Factors Affecting Safety Stock Factors ‘Lifecycle Stage of the Product’
Product Shelf Life Business Importance
Sub factors Introduction: When a product is introduced in the market, the error in the forecasted demand will be high. The error can be either positive or negative depending on customer response and hence, a moderate level of safety stock is required. Growth: During the growth phase, it makes sense to keep a high safety stock to meet increase in demand. Maturity: At this stage, the safety stock should be kept as low as possible or completely removed because demand prediction is almost precise. Decline: Safety stock should be completely removed. Perishable products: Short shelf life requires a low level of safety stock.
Highly profitable product All these situations call for a high safety stock level. (If a product does not feature High growth prospects among the top sellers for a company Product falls in focus category of then it does not make sense to worry company’s vision Average sales number for the product is high about its safety stock number). Sales Pattern Seasonal: Just before the season, demand picks up; it makes sense to maintain a high stock level. Regular: Low levels of safety stock should be maintained. Supply Side Distance from vendors: High safety stock should be maintained if the distance is large. Constraints Relationship with suppliers: If suppliers are reliable and can cushion against supply variability, then it makes sense to have a low level of safety stock. Logistics costs: High logistics cost calls for a high level of safety stock. Capability of the supplier to deliver on time: If high, then low level of safety stock should be maintained. Bargaining power with supplier: If high, then low stock can be maintained. Number of suppliers: If a number of suppliers can supply the same product, then a low safety stock will suffice. Demand Stable: Notwithstanding the seasonal sales cycle the demand for some products are determinable and stable. Low level of safety stock is required in such case. Fluctuating: If a product’s demand is abrupt and exhibits random behaviour, then it makes sense to maintain a high value of safety stock. Interaction Type of customer: Profitable customers call for maintaining a high value of safety stock. with Promotions: These will lead to abrupt increase in demand and would require high Customers safety stock for serviceability. Customer tolerance time: How long is customer prepared to wait for the product? If time is high, then low safety stock level would suffice. Relationship with distributors/dealers: If it is possible to postpone the assembly of end product to dealers, then rather than end product safety stock, component safety stock should be given elevated importance. Costs Unit cost: If cost is high then high level of safety stock will lead to too much capital being tied up in inventory. In such a case, low level of safety stock should be maintained. Cost of stock-out: If high then it calls for maintaining a high level of safety stock. ‘Quantity Transport quantity: It saves lot of cost when full truck load of material is ordered as Considerations’ compared to half truck load. Quantity discounts: If quantity discounts from a supplier is high, then the company should purchase more and maintain a high level of safety stock. Purchase frequency: If high, then low levels of safety stock would be sufficient to ensure serviceability. Obsolescence Some products can quickly become obsolete while on the shelf. If such a probability Risk is high then, low level of stock should be maintained. If a product can be used as a raw material to manufacture several products, then the ‘Usability company may not be worried if safety stock level for such product is high. in Other Products’ Replenishment If it is Vendor Managed Inventory, then safety stock requirements would be less, for Model order-based inventory management stock requirements would be more. If both co-exist, then the safety stock strategy should be evaluated on an individual product basis.
fixed value of safety stock over several ordering cycles and do not revisit the numbers frequently. This creates high inventory in the supply chain.
CORRECTNESS OF SAFETY STOCK Merely calculating safety stock is not enough. It is also essential to capture relevant data to find out if safety stock is meeting its real purpose. Data such as: • Number of stock-outs • Trend between stock-out and machine down time, if both are high, something is wrong • Forecast accuracy • Lost sales due to stock-outs Calculating sales loss is not easy. Actual demand needs to be captured along with actual sales. Lost Sales = Actual Demand — (Actual Sales + Sales of Own Substitute Product + Sales Postponed) In this case, it is assumed that substitute products of competitors are not purchased. Acquiring a new customer is also extremely costly. A company may lose the customer due to stock-outs, and the cost of losing the customer should also be factored in. Lost sales are not always product specific, but are associated with the customer’s shopping basket. For instance, a customer goes to buy fruits, toothpaste and a cold drink from the store. When he finds his preferred toothpaste brand is out of stock, he leaves the store and purchases all the items from a competitor. After lost sales due to stock-out are ascertained, as well as when, the table factors change. The company must then revisit its safety stock number and update it to avoid too much or too little inventory. Nitesh Luthra, Associate Consultant – SAP Supply Chain Business Practice, Cognizant Business Consulting. Ravi Roshan, Associate Consultant – SAP Supply Chain Business Practice, Cognizant Business Consulting.
NOVEMBER 2012 • SMART LOGISTICS • 39
SHIPPING TRANSPORTATION PLANNING & EXECUTION
combinations. com • Carrier Selection: Carrier selection is a critical part of the transportation management compliance process. The automated carrier selection capability within the software decision engine can quickly assess a range q of user-established o decision criteria, such dec as contractual obligations, co shipping lanes, shipment shippin priority, cost & carrier past
FI e CIE NCY
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REGARDLESS of whether your supply ly chain is international orr domestic, effectively managing the purchased transportation process to reduce complexity, improve control and reduce costs is essential. Next generation transportation management solutions should be fast too implement, easy-to-use se and maintain, deliver high igh value and support internterenterprise collaboration between shippers & carriers. Thee platform
lT i h o HE Ac F -CLOCK E
Effective management of the transportation process is critical. To ensure this, there is a need for transportation planning & execution and logistics flow control. Ensuring these would help the concerned parties to have better control over the goods being transported and would also offer them the added benefit of reducing costs. used should have broad capabilities to manage the flow of freight with unmatched connectivity to thousands of transportation providers, built-in mode specific functionality, integrated private fleet/for hire transportation management, seamless integration with cross-border customs compliance, and much more. Transportation management suite addresses unique requirements across truck, air, ocean or parcel modes with a modular architecture that can be implemented quickly as a whole, or only in select areas where you need the greatest help. The global logistics network accelerates time-to-value with preexisting network connections to trading partners. It helps to: • Manage carriers and transportation contracts • Configure route guides and quote/ rate shipment • Plan and optimise shipment
40 • SMART LOGISTICS • NOVEMBER 2012
• Evaluate & select the right mode and carrier combinations, including private/dedicated fleet integration • Streamline warehousing operations with dock appointment scheduling and yard management • Track shipment to improve visibility and manage performance • Support supplier and carrier compliance programmes • Audit and settle freight bills to improve the financial supply chain
TRANSPORTATION PLANNING • Load Planning/Consolidation: Load planning is the process by which shipment are turned into larger loads. With latest technologies, users can combine shipment for efficiency and cost savings with the ability to manually create loads, or to use the system’s aggregation and routing algorithms to automatically create optimised shipment
performance and evaluate how to best convey the shipment. It can track when planners deviate from the system selected carriers and provide historical analysis of the extra costs incurred to curtail ‘maverick’ transportation spending. • Carrier Connectivity: Electronic connectivity to carriers is a key driver in helping to facilitate effective plan execution. This is where reality meets the plan in terms of achieving desired costs savings and services levels. Effective collaboration with carriers is essential to streamline the end-to-end transportation management process and ensure that carriers and other logistics intermediaries meet the service levels the organisation demands. The new technologies enable users to connect and collaborate with ‘high tech’, ‘low tech’, and ‘no tech’ carriers and logistics services
providers for the tender through proof of delivery execution process.
TRANSPORTATION EXECUTION • Tendering & Booking: Electronically offering a load to a carrier and efficiently managing their response is a key element of effective transportation execution. The tenders can be communicated to the carrier via the system GLN through automated electronic methods including auto-faxing, e-mails (text or HTML), XML and EDI; hybrid electronic methods via the user interface or booking portal; or manual methods including telephone and fax. • Documentation: Shipment documentation is a core component of the logistics process. Some of the shipment documents supported includes (but are not limited to): - Truck: Bill of Lading (BOL), Master Bill of Lading (MBOL) - Air: Airway Bill (AWB), House Way Bill (HWB) - Ocean: Bill of Lading (BOL) - Parcel: Carrier compliant parcel labels • Tracking & Proof of Delivery (POD): By enabling the systematic sharing of data such as advanced shipment notices, booking confirmations, carrier statuses, POD and more using electronic messages, it empowers effective monitoring and performance management of the shipment process.
LOGISTICS FLOW CONTROL Logistics Flow Control (LFC) is the next generation retail inbound logistics management solution designed for rapid return on investment. It is a multi-party Microsoft-based cloud solution that breaks the paradigm of having to coordinate multiple parties with multiple systems that have historically made inbound retail supply chains inefficient and hard to manage. With LFC, retailers, suppliers, carriers and brokers can use the same solution
to manage the ‘purchase order to warehouse receipt’ process, helping retailers to: • Improve control of inventory in motion • Reduce purchase order cycle time, transportation costs, inventory carrying costs and custom filing fines • Measure supplier and carrier performance. LFC provides the essential capabilities for retailers, suppliers, customs brokers and carriers to benefit from unprecedented levels of coordination at each stage of the inbound supply chain logistics. By leveraging data across all of the parties involved in the inbound supply chain, it helps shippers to simultaneously manage their commercial, logistics and customs filing processes. By uniting previously disparate processes, it provides integrated capabilities including:
A collaborative supply chain document management solution facilitates the consolidation of information required by importers into a concise and accurate electronic data set— the shipment folder. • Visibility: Retail buyers, merchandisers and logistics personnel can know the current status, location, Estimated Time of Arrival (ETA), and contents of every purchase order & shipment. Based on status and priority of inbound orders, shipping plans & receiving priorities can be adjusted in LFC to alleviate Out Of Stock (OOS) and the most pressing current inventory replenishment needs. • Compliance assurance and shipping advice processing: A key step in bringing order to the inbound supply chain is to coordinate with the supplier on the ship date, receipt date, carrier, methods of shipping and requirements on orders that can
or cannot be split, short shipped, or consolidated. LFC takes these important compliance requirements out of paper guides and into an electronic system that supports the supplier with pre-populated source data on orders, and handles customer delivery expectations, compliance rules, validation processes, UCC carton labeling & electronic delivery confirmations. The supplier, carrier and retailer can then be assured of accurate information, compliant shipments, timely delivery & priority order handling. • Automated receipt scheduling: In dynamic retail environments, order priorities change daily, while purchase orders are in transit. LFC provides a mechanism for the retailer to adjust order priorities and collaborate with the inbound carrier to define the receiving priority and bundling requirements on shipments for co-delivery at warehouses. Deliveries that adhere to the requirements spelled out by the retailer can automatically be scheduled for a receiving appointment at the warehouses, eliminating tedious and error-prone manual appointment scheduling processes. • Entry control and yard management: When it is time for the shipment to arrive, LFC provides enhanced security and control by validating facility entry to expected loads, reducing facility congestion and labour issues by screening out unscheduled and improperly documented loads, and allowing loads to be put away with proper tracking of placement when not received directly to the warehouse. • Load flow control: Manages suppliercontrolled freight by providing the retailer and its suppliers and carriers purchase order visibility & consolidation that is synchronised with the retailer’s available dock appointment times. The traditional coordination process from supplier
NOVEMBER 2012 • SMART LOGISTICS • 41
Transportation planning & execution, continued
to carrier to retailer is streamlined, as the dock appointment is confirmed at the time of purchase order consolidation, thereby reducing total delivery time. Retailers have the ability to control what purchase orders get consolidated by the supplier and manage their movement in-transit. Changes to the schedule by any party are measured against a date validation guide, helping to ensure that deliveries comply with purchase order commitments. • Import compliance: A collaborative supply chain document management solution facilitates the consolidation of information required by importers into a concise and accurate electronic data set—the shipment folder. With all the required information in a single location, the retailer can create an accurately rated commercial invoice ready for the broker or self-filing retailer to transmit to the customer. A properly
Transportation management suite addresses unique requirements across truck, air, ocean or parcel modes with a modular architecture that can be implemented quickly as a whole, or only in select areas where you need the greatest help. The global logistics network accelerates time-tovalue with pre-existing network connections to trading partners. rated commercial invoice ensures that the retailer pays the proper duties and taxes, eliminating filingrelated fines. The solution includes: consolidation of purchase orders and shipment notifications into a customs-ready shipment folder; Harmonized Tariff Schedule (HTS) classification code updates through third-party HTS services; scanning and sending of imaged documents;
imaged document storage; broker’s package completeness validation; imaged document delivery management to the customs broker; and Canadian Release Notification System (RNS) release notification. All of this data can be directly shared through the Global Logistics Network or accessed through the specific user-right managed portals. • Performance Reporting: At each stage of the processes—from purchase order to receipt—performance information is collected by LFC that can be used to improve the performance of suppliers, carriers & the retailer; cut lead times; and adjust the receiving programmes compliance rules to optimise results. Dr Purnendu Mishra, Principal Officer-cum-Joint DG (Tech), Mercantile Marine Department, Chennai Email: purnendumisra@yahoo.com
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 So, join our endeavour to provide relevant and useful content to our readers… rush your articles, write-ups to archana.nayudu@network18publishing.com
42 • SMART LOGISTICS • NOVEMBER 2012
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At a time when a dampened economic outlook is elbowing shoppers to pull their wallet strings, they are still ardent to sniff out tempting deals. The smart shop owners and retailers are augured well by the steady headway being made by the modern trade which, in itself, is benefitted by the influx of a confident, aware and fast-evolving young customer. PRATEEK SUR
FOCUS groups, at times, are set up by companies themselves to check the public response towards any newly launched product or service. Once the people in the focus group stop being polite, companies can extract a lot of important findings from them which help them better their service towards customers. At one such series of sessions commenced by HyperCITY across Thane, Bhopal and Hyderabad in the latter half of 2011, buyers were open-minded in their praise for the retailer’s stores. That was the time when the economic slowdown had truly set in. Customers were pleased with their store ambience, service standards and product baskets. Although, towards the end of the conversations, softly, and almost shyly, more than a few customers opened up that shopping at the store was a costly affair! While in better economic climes, HyperCITY’s finesse could help it lead the market, the solemn consumer mood together with its traditional receptiveness to price at once became a steeplechase-like hurdle for customers. According to Mark Ashman, CEO, HyperCITY Retail, “Hypermarkets
have to be seen as providing value, and we are accordingly re-jigging our strategy, without compromising on our other core strengths.”
DRESSED FOR DIWALI Nielsen India’s recently released ‘Shopper Trends Study’ covers the top eight metros and six other cities with populations of over 20 lakh. It strengthens what the Indian shopper is looking for: deals. The fraction of shoppers vigorously looking for advertising has shot up to 54% from 39%, a year ago. Saliva-inducing schemes work like an allurement in such situations, but they have to tie into the whole shopper experience. Elaborating further, Suyash Chauhan, GM – Customer Marketing, Hindustan Unilever Ltd, informs, “Deals and promotions are important elements in purchase decisions, but not the only ones. Shoppers also derive value from the product offerings, ease of access to the brands and in-store shopping experience. Promotions add value if all these are taken care of.” Seconding the thought, Rob Cissell, CEO – Value Formats, Reliance Retail
avers, “The ‘body language’ of the key deals needs to be strong. Customers appreciate shopping in an exciting environment that changes with the seasons and gives them something new to experience. At Diwali, you must be ‘dressed for Diwali’.”
SCM IN NEW PERSPECTIVES: THE PULSE OF ORGANISED RETAILERS The role of supply chain in Indian organised retail has expanded over the years with the boom in this industry. The growth of the Indian retail industry, to a large extent, depends on supply chains. Hence, efforts are being made by Indian retailers to maintain it. Also, globalisation of business has received a great deal of pressure in recent years. The pressure of global competition is frequently cited as a primary driver for greater customer demand for improved products and services. These increased demands have caused businesses to pursue improvement initiatives, such as implementation of Just-in-Time (JIT) and Quick Responses (QR) inventory management policies, business reengineering, Vendor
NOVEMBER 2012 • SMART LOGISTICS • 43
Tempting deals, continued
Managed Inventory (VMI), Collaborative Planning, Forecasting and Replenishment (CPFR) and Supply Chain Management (SCM), to enhance their competitiveness.
DEAL SEEKING Deal-seeking is now united with a rising penchant for bulk bundles to neutralise the brunt of ever-increasing prices. “People understand grammage better during recession,” points out a shop owner on condition of anonymity. According to Nielsen’s findings, “Around 35% of modern trade shoppers in the present day, cite purchasing bulk as their retort to the ever-mounting food and item prices.” It is such ‘shopper tendencies’ that are forcing retailers towards making ‘deal-weeks’ as yearly proceedings that cater to a emerging ‘breed of bargain seekers’ all year round. Future Group’s hypermarket chain Big Bazaar and similar modern trade formats have transformed national holidays like August 15 and January 26 into mega sale occasions. India is a magnificent market for ‘upping the ante’ year by year and, at times, even quarter by quarter. Deals eventually help retailers trade and sell more than shoppers would have otherwise meant to purchase. Commenting on the same, Rahul Saigal, VP – Retail, Ogilvy Action India, a brand activation agency, said, “Retailers and brands are constantly looking to create more occasions that incentivise shoppers to trade-up.” Since retailers cannot sustain a 24x7 purchasing euphoria among shoppers, they come up with opportunities to stimulate bulk purchasing. Big Bazaar’s ‘Sabse Saste 5 Din’, five days with Republic Day squeezed in between had set the entire nation on a rampage. Offering ‘mega discounts and huge savings’, such shopping orgies are no doubt a great way to woo shoppers, but to stand out in the clutter of bargain offers, shoppers have to get their product and packaging mix
44 • SMART LOGISTICS • NOVEMBER 2012
SIX STEPS TO SUCCESSFUL SUPPLY CHAIN COLLABORATION Collaboration offers generally promote and help the consumer goods makers and retailers. Many a times, the joint initiatives do not prove to be very productive. But in all probability, during the festive season, this is the best thing to do. The more and more offers that retailers come up with, the more consumers benefit with minimum labour. To ensure success, partner companies should take these six actions together: Collaborate in areas where they have a solid footing Turn win-lose situations into win-win opportunities with the right benefit-sharing model Select partners based on capability, strategic goals and value potential Invest in the right infrastructure and people Establish a robust and joint performance-management system Collaborate for the long term. right. Elaborating further, Sumanta Datta, VP – Customer & Commercial, Coca-Cola India & South West Asia, explains, “While pricing & promotions will continue to play a critical role in the context of the value-conscious Indian shopper, promoting the right brand, in the right package, in the right channel and targeting the right shopper will make all the difference to drive profitable sustainable growth.”
IDEAL INDIAN SHOPPER Slowdowns come and go. And in a country where the young middle class shopper with disposable earnings in his pocket is coming into his own along with modern trade outlets like convenience stores and supermarkets, the question shop owners are tackling with is: who is the prototypical Indian shopper? Attempting to throw some light on this, Piyush Kumar Sinha,
Professor – Retailing & Marketing, and Chairperson – Centre for Retailing, IIM-A, lists down some of the prime traits. “He is younger, innovative and a risk taker. He is comfortable with technology, has a higher disposable income, but a shorter attention span and a shortened and divided loyalty.” Sinha considers the Indian shopper is experiencing a hastened progress that is very keen to embrace new set-ups and thoughts. The new-age Indian shopper seeks utilitarian and hedonistic value as well; thereby making it a tough call for the brands selling to them. The new-age shopper is acquainted with his brands and their characteristics far better than his predecessors. According to Satyaki Ghosh, Director – Consumer Products Division, L’Oreal, “The new-age shopper is well-informed and, thanks to the digital medium, brands can no more make claims that are not authentic.” The brand, at present, has a reach of nearly 1.1 million outlets and is glancing at growing its charisma in the modern and traditional formats. It has a three-branched strategy, as per which it strives to: • Firstly, increase the number of footfalls • Secondly, guarantee that there is better conversion rate of these footfalls into possibly long-standing customers • Thirdly, widen the basket size of these footfalls so that more and more people get to know the brand.
THE GENERAL TREND Generalisations by Indian shoppers have their own quirks. In such a diverse market, where each region has its own idiosyncrasies, the Indian shopper can be disastrous for shop owners. Depending on where the shops are based, shoppers have their own preference for products, brands and stores. So, no good product or even a well known brand can be assured that after opening a store at one corner of the city that there would be a high probability that people from
trade like a duck to water. They employment. However, our country the other end might go there to shop. are seamlessly comfortable being in also poses a big challenge to organised Shoppers might consider it to be too a crowded bazaar as also in an airlarge retailers, particularly during the far to travel to or may even settle conditioned supermarket.” festive season. for a similar, but less famous brand, Nielsen’s study here dots to the For the retailer to be successful, which is closer to their residence. For influx of the ‘Crossover Shopper’. This the key is proper SCM. The challenge example, in NCR, online retail buys shopper is the one who is at ease with comes from a number of factors, keep a higher tally. On the other hand, traditional formats as well as with including: the mall culture is more widespread in modern ones. In 2011, modern trade • Huge size of population of our southern and western India than it is grew more by 28% from the last year country in the eastern and the northern parts and garnered a share of 9.2% in the • Varied cultures and hence, varied of the nation. The economic outlook overall market—which was a jump of tastes matters more for people from some 1% from last year. It is expected to • Very poor infrastructure (like background than others. be even more by the end of this year. improper roads) Vinay Bhatia, Customer Care According to Adrian Terron, Executive • Bad connectivity between Associate and VP – Marketing & Director – Retailer And Shopper, production centres and markets Loyalty, Shoppers Stop, probed deep Nielsen India, “A stabilisation of • Lack of proper cold chain facility into the records of the Shoppers Stop shoppers who spend a majority of (like refrigerated transportation, Loyalty Club to figure out whether their money within modern trade at warehousing, etc.) the ups and downs of the Sensex had this level indicates that this format is Under these circumstances, it is very had any consequence on the regular a part of the regular buying cycle for tough for retailers to maintain large Indian shoppers’ behaviour. After India’s new breed of urban shoppers.” organised retail outlets and also cope intensive research, he found out that Certain categories, which were with these problems. Thus, during the an impact was definitely there, but it pining away over time, have modern festive season, retailers present varied was significantly higher on Gujarati offers to the quintessential buyers. When the Indian shopper to buy in stock market is bullish, While pricing & promotions will continue to play a bulk. This, in turn, would they tend to be the critical role in the context of the value-conscious help retailers cope with most spirited shoppers. Indian shopper, promoting the right brand, in the right package, in the right channel and targeting the problems. Needless However, when the stock the right shopper will make all the difference to to mention, if the cash market is bearish or is drive profitable sustainable growth. keeps flowing in at a listless, shopping activity Sumanta Datta, VP – Customer & Commercial, Coca-Cola India & South West Asia fast pace, there would be gets muted for them. very less time for retailers trade to thank for turning them into to think about the above mentioned THE PER MILLION CONSUMER the category where the quintessential problems. Thereby, retailers could Nielsen’s study dots on a tipping point shopper would definitely have a look easily bypass the problems and ensure in the modern trade considering the at it. Here, Datta adds, “If you look large sale of products. numerous corner stores or kiranas that at any emerging categories within are spread all over the landscape. As beverages, modern trade plays a critical the density of modern trade stores THE QUINTESSENTIAL INDIAN SHOPPER role in building trial for these new is still as low—six stores against So, the final question still remains—Is segments.” There are innumerous cases 7,000 kiranas per million consumers’, there a magical recipe for the new-age that a shopper could look into for this organised retailers are not losing sleep Indian shopper? Sinha concludes by like the dairy, fruit juice and energy over this. advising a re-jigging of the hoariest drinks segments. Ashman avers, “I have long gone formula in the marketing book, past bothering to agree or not agree on “While the four Ps (product, price, how many million customers are there. promotion and place) are just the tools SUPPLY CHAIN IN ORGANISED RETAIL I know it is a big enough number. that need to be manifested depending India is going through a retail revolution The challenge is how to turn that on the segment and market condition, with all the big business houses potential into an opportunity.” Sameer retailers may do well to remember the entering this sector. International Satpathy, EVP and Head – Marketing other Ps—perseverance, persistence, giants in this sector like Wal-Mart, (Consumer Products), Marico India, patient and profits.” Tesco and Carrefour are also trying seconds the thought by saying, “The to enter the Indian market. Retail is Indian shopper has taken to modern offering tremendous opportunities in prateek.sur@network18publishing.com
NOVEMBER 2012 • SMART LOGISTICS • 45
CASE STUDY DISAGGREGATED MANUFACTURING SUPPLY CHAINS
Leveraging on the
Global Advantage The level of disaggregation varies by industry and by products within the industry. But with the big globalisation in manufacturing, as more manufacturing has moved away from developed to emerging nations, more industries have evolved to build far-reaching, global supply chains. TRADE proliferation and global access to digital technology have been key drivers of the expansion and disaggregation of today’s supply chains. A number of factors have enabled this rapid globalisation or the ‘big shift’, including a significant change in geopolitical relations between the east and the west, the widespread growth of digital information infrastructures and computerised manufacturing technologies, and the proliferation of bilateral and multilateral trade agreements. These factors, along with others, have permitted the disaggregation of supply chains into complex global networks allowing a company to interact in the design, sourcing of materials & components, and manufacturing of products from virtually anywhere —while satisfying customers almost anywhere. The term ‘disaggregated’ refers to the separation and splitting apart of the manufacturing value chain into different locations or countries. No longer is a product designed, produced and sold in a single country or even a single region. Facilitated by access to digital information and open trade routes, a company can procure materials at the lowest price in one location and ship them to a location with low labour rates, as engineers in yet another location make product design decisions.
BOEING’S 787 DREAMLINER The Boeing’s 787 Dreamliner illustrates the concept of disaggregation, showing that the many activities
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Figure 1: Disaggregated Supply Chain: The Boeing 787 Dreamliner Example
required to bring a product to the consumer are now being performed in different countries. The Dreamliner is manufactured with components from 287 suppliers across 22 countries, creating a complex global network that would not have been possible or desirable several decades ago.
APPLE iPOD The supply chain for the Apple iPod is also an example of a disaggregated supply chain. iPod components come from multiple geographies, including Japan, the US, South Korea and Taiwan. Like other multinationals, Apple seeks to minimise its cost basis through global sourcing. Out of the total value of the iPod, Apple captures the greatest portion of the value created (36%), followed by suppliers of major components in Japan (12%), the US (3%), South Korea (0.4%) and Taiwan (2%).
How is the supply chain for the small iPod so diverse, complex and global? The answer points back to trade policy: WTO’s Information Technology Agreement (ITA), which entered into force in 1997, eliminated tariffs on information technology products with a few exceptions. This agreement is plurilateral, meaning any of the WTO members can adhere to it. Currently, over 70 countries are included, which comprise roughly 97% of world trade in information technologies, making the global explosion of technology possible. This article is an excerpt from the whitepaper titled, ‘The Future of Manufacturing – Opportunities To Drive Economic Growth’ by A World Economic Forum Report in collaboration with Deloitte Touche Tohmatsu Ltd.
EFFICIENT TRANSPORT SPEND MANAGEMENT STRATEGY
Key to long-term savings As companies strive to strategise in sourcing domain, they are opting for better methodologies, in search of reduced overall costs and better efficiencies. Transport Spend Management, in general, is complex as it is difficult to manage centrally while accounting for regional factors and delivery constraints. With an objective to manage transport spend as strategic spend, organisations are inclined to move towards best in class processes and technologies that will enable managing complex transport spend more efficiently. TRANSPORT Spend Management (TSM) in India is different from more mature markets. In India, it is not always feasible to find partners with larger fleets across the country. This forces high fragmentation in the transport spend with a number of transporters being deployed—in some cases 100+—and ensures that developing the transporter as a partner becomes difficult. Managing the spend at transporter and lane levels while ensuring contracted share of business & right vehicle selection adds more to complexity and leads to leakages in planned cost. Transport procurement in India is typically identified with annual contract negotiations. Most of these negotiations happen at local or regional levels. Lane by lane or per kilometre rate negotiation is the key identifier of such sourcing methodology. Cost is the primary driving factor and the previous year’s costs are used as benchmarks.
TRANSPORT PLANNING: THE 1ST STEP Transport procurement must be preceded by exhaustive transport planning and spend analysis. Through
direct procurement without robust transport planning, you are likely to not procure right. The key objective of planning & spend analysis exercise should be to identify spend levers, which can be used to minimise cost at the desired service levels. Transport planning can be used for: • Identifying an optimal transportation mode and fleet mix • Consolidating freight through pooled loads, continuous move routes & backhauls • Budgeted vs actual spend gap analysis • Identifying bleeder lanes and maverick spend • Evaluating carrier market status • Carrier-spend analysis and potential savings due to supplier aggregation Strategic transport planning can enable you to identify savings opportunity to reduce cost by 5–15%. The preliminary requirement for spend analysis is compilation of clean data. Most organisations have the actual spend data, but it is buried in ERPs and other data systems. Though there are better tools available specifically
for TSM, most companies prefer to use excels for spend analysis. To ensure consistency, a standard process should be set up for data collation for transportation spend and its integration with spend analysis being automated. Best-in-class companies use the Transport Control Tower approach to manage the spend from transportation planning to execution to payment. This not only enables sharp analytics for transport procurement, but also ensures that execution is controlled through defined business rules.
GOING BEYOND E-AUCTIONS Transport planning and spend analysis provides you insights into the historical spend behaviour and the cost levers that can lead to savings. To design a strategy for transport procurement, the additional key component, which is a must, is transportation market understanding. Transporter markets in various parts of India are different from each other. Some transport mandis are regulated through strong transport unions, while some areas are served by very few transporters leaving
NOVEMBER 2012 • SMART LOGISTICS • 47
Efficient transport spend management, continued
you with limited carrier options. Therefore, buyers’ vs. sellers’ market analysis enables you to define separate strategies in line with your overall transportation plan. Reverse auctions technologies drive the auction process through the internet, which enables the process to be completed in a shorter time frame. Such technologies use ‘bundling’ to combine lanes with similar characteristics. Rather than evaluating thousands of bids, the bidding is done on bundles that reduce the complexity of the problem and facilitate quick decision making. However, there are many limitations to this approach, such as it excludes smaller transporters from bidding, which cannot serve all the lanes in the bundle. Also, bundling is defined based on subjective analysis that might be the best bundles for all bidders. For example, if a bundle consists of A-B, B-C, C-D, D-A lanes and a transporter does not have the available capacity for D-A lanes, he cannot provide best prices within this bundle. Another limitation for such auctions is that they drive savings from the margins of the transporters rather than through analytics. This mostly results in the price-war with the transporters quoting rates that are not sustainable. This either results in the poor service levels or transporters deploying foul means to recover the cost. Companies accept this as standard market dynamics and do not realise the flaw in the procurement process itself! Therefore, any reverse auction process must allow transportation suppliers the following flexibilities: • Submit proposals that take advantage of their unique strengths • Specify terms of delivery, mode of delivery and lane combinations that better suit their business • Offer volume discounts, rebates on reverse hauls, and tiered pricing, or conditional (if/then) bids that take advantage of their own business strategies
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• If business follows the peak and lean demand cycle, transporters should be allowed to bid separate rates for a peak and lean season, which could truly reflect their real costs. Conditional bids drive additional value with win-win conditions for the shipper and the carrier. These inputs can be fed to an optimisation engine for analysis and best case scenario selection based on various business rules such as: • Minimum/maximum number of carriers awarded • No more than two carriers for each lane • At least 2 carriers for each origin • Favour or penalise carriers based on non-cost factors (for example, carrier performance score, fleet types, etc.)
Setting up a transparent system to monitor and share carrier’s performance criteria such as service level, on-time delivery, asset quality, etc., which decides share of business among core carriers, will build a healthy competition and inspire carriers to continuously improve and benchmark costs against each other. When the entire lane network is opened for transporters, it enables them to find more opportunities to extend the cost savings and build a partner-oriented approach. Change in the process clearly demands the transport spend to be treated as strategic spend backed by optimisation for the organisations where transport cost contributes significantly to total distribution costs. Strategic transport procurement in such cases may lead to overall savings up to 10%.
CORE CARRIER PLAN Bidding analysis through optimisation engine and what-if scenario analysis provides you a strong strategic negotiation tool for cost optimisation. The next step is:
• Focussing on balancing rates with the capacity, service levels and carrier mix that suits your business • Finding the right mix of carriers based on business strategies & needs • Evaluating the impact of regional or lane-level decisions on your network as a whole While evaluating carriers, looking for long-term partnerships can offer an organisation a competitive advantage. Core carrier programmes unlock the advantages over conventional procurement methods, such as: • Enhancing agility and developing a robust and sustainable transportation network • Empowering organisations to manage demand cycle and economic uncertainties with better control • Enabling productive negotiation • Deploying business-specific equipment and instruments without upfront capital expenditure • Identifying carriers that are eager to grow with the business and are keen to collaborate can enable better exception management and drive innovation.
TSM: MANTRA TO RETAIN SAVINGS YOY TSM should enable removing cost from the system rather than from margins. This enables organisations to build core carrier programmes and partner relationships with the transporters through better collaboration. Transport procurement must be followed a by strong execution and monitoring system, which ensures key savings levers specified in the contracts, such as share of business, service time, etc., are maintained and identified savings opportunity is delivered as well. The process will ensure that organisations retain these savings year-on-year and cost & service levels are well-balanced with minimum business risk. Yuvnish Dhamija, Sr Consultant, ThinkLink Supply Chain Services Ltd. Email: yuvnish.dhamija@thinklink-scs.com
PEOPLE, PROCESSES AND PARTNERS STRATEGY
3
s to Success
Today, companies are increasingly strengthening their focus on developing a competitive supply chain mechanism, given that they are now highly aware of the benefits of offering quality products in the market. A modern and stateof-the-art supply chain will ensure operational efficiency as well as deliver high levels of satisfaction to customers. However, to develop such a competitive supply chain, companies will require quality people, processes and partners. ARINDAM GHOSH
TO tackle the rising levels of competition, companies are increasingly formulating strategies to retain their foothold while capturing maximum market share. One such strategy that companies are increasingly looking into is supply chain. Presently, most companies are investing heavily to make their supply chains competitive. As part of the initiatives taken in this direction, supply chain managers or directors are now being incorporated into the boards of many corporate bodies. Companies are realising that supply chain is the only part of the system that has a control on a company’s top line as well as bottom line. Commenting on the importance of having a competitive supply chain, SK Roongta, MD, Vedanta Aluminium & Former Chairman, SAIL, explains, “An efficient and competitive supply chain is one of the major distinguishing factors between different business organisations who are looking to capture the market.” A competitive supply chain can effectively tackle various challenges involved in sourcing, creating and delivering value to the customer while
ensuring operational efficiency. “It is absolutely critical for any industry who wants to grow and expand in any market,” Roongta adds. Complementing Roongta’s views, Deepak Dheer, MD, Mahindra Forgings Ltd, avers, “An efficient supply chain can help a company create a competitive edge in the market at a
The Indian logistics technology market is set to grow at 19.8% between 2010 and 2015 and is expected to cross US$600 million by 2015. much faster pace. It is critical for any company.” A competitive supply chain also leads to high levels of savings for companies, he adds.
CRITICAL ELEMENTS: PEOPLE, PROCESSES & PARTNERS Globalisation and stronger integration of various economies have mandated companies to develop a competitive supply chain mechanism to efficiently manage domestic as well as international trade. The statement
holds true especially in today’s times when a competitive supply chain can only be implemented by companies, if it has at its disposal, the 3Ps—quality people, processes and partner. The 3Ps are critical to ensure high levels of productivity from the supply chain and make it competitive. Elaborating on the same, SL Ganapathi, Managing Partner, Symatec Associates Pvt Ltd, explains, “These are the three most critical Ps in the supply chain. Partners are important as they provide stability, reliability and long-term cost advantage—be it a component source or a logistics service provider. Similarly, the channel partners, for instance, distributors, stockists, dealers, retailers, etc., are the interface between the company and the customers. Their ability to perform on your behalf is cutting edge vis-à-vis competition.” “Processes are important too as they minimise transaction costs and also eliminate inflated inventory in the system. Proper demand forecasting and production & distribution planning processes will lead to optimal supply chains. The importance of people always remains the highest priority in
NOVEMBER 2012 • SMART LOGISTICS • 49
People, processes and partners, continued
organisations—quality, knowledgeable and motivated manpower will deliver,” he continues. He adds, “The logistics services industry in India has come a long way and has matured to become a positive help in terms of solutions & cost optimisation for customers. People with domain knowledge and managerial aptitude will clearly bring out the options for logistics before the management and help the management choose the best logistics alternative. Additionally, processes matter in transactions and logistics is one of the many transactions. Hence, this aspect is important.” To this, Dheer adds that partnership is also important here.
PRACTICES THAT CAN BE FOLLOWED
(though not too often). Partners: Be strategic (long term) in choosing partners, share with them the gains from your partnership with them as well as short & long-term information; treat them as equals.” To this, Dheer adds that to ensure successful integration of 3Ps, people who are involved in the process need to the highly trained and equipped to look into various aspects like technology and IT, logistics operations, etc. Processes, on the other hand, are crucial; they need to be heavily driven by technology as they will improve the productivity of the supply chain as well as ensure safety and security. Further, implementing technological solutions will make the process agile and highly responsive. However, in this regard,
For a country, like India, where logistics cost is comparatively high with respect to other countries, a reduction in cost can lead to huge levels of savings for companies. According to Ganapathi, “When markets are limited and defined, costs create the cutting edge for competitiveness. Supply chain cost in the modern age of, even outsourcing manufacturing, comprises a very SOURCE: McKinsey agile operations (Mc Kinsey & Company) large percentage of Roongta points out that the ‘trust overall costs. Hence, if supply chain factor’ will strengthen the associations is competitive, there would be a of all parties involved in the process competitive pricing advantage or and make the partnership a successful there would be enough money for and sustainable one. promotions and positioning.” Highlighting some of the practices that can be followed to select quality LOW PENETRATION OF TECHNOLOGY: A people, processes and partners, MAJOR CHALLENGE Ganapathi says, “People: Choose the One of the global practices, which best, train & motivate them and keep Indian companies can emulate to them engaged with 3600 exposure make their supply chain competitive, and give them a chance to climb is traceability. In this regard, the ladder. Process: Distil from the implementing technology is key. best results from inside and outside However, the implementation of and document—but keep it dynamic technology is at a very nascent stage
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in the industry. These solutions play a crucial role in enhancing the productivity of the entire network and prevent delays, breakdowns, spillage and pilferage of shipment. They can integrate the entire operation of the company, provide visibility through real-time information and help run safe and secure operations. However, the level of awareness in adopting such systems is growing increasingly among Indian companies, which could actually be a huge boon to the growth of the Indian logistics sector. Further, the Indian logistics technology market is set to grow at 19.8% between 2010 and 2015 and is expected to cross US$600 million by 2015. Additionally, the presence of infrastructure and finding quality manpower can be a challenge. In order to tackle this scenario, companies need to concentrate on bringing out innovative modules or training programmes that can easily train people. Additionally, massive investments are also required to improve infrastructure.
3Ps: KEY TO CAPTURE THE MARKET Companies operating in the Indian logistics sector are constantly searching and formulating strategies to stay ahead and tackle cutthroat competition in the market. Under such a business climate, if a logistics services company has to stay ahead, it needs to give its customers the best available service by ensuring safe and secure delivery of goods & services at the right time and at the right location while incurring the minimum possible cost. This can only happen with the presence of quality in 3Ps—people, processes and partners. arindam.ghosh@network18publishing.com
COST-EFFECTIVE STRATEGIES
BASED on the collective experience of working with retailers across the world, leading technology solutions company, Oracle, has provided the best strategies that retailers have leveraged when selecting a price planning or optimisation solution. Take a look…
criteria for any technology investment. By ‘open’, we are referring to the ability to bring data, often from multiple sources, into and out of the system easily. ‘Open’ also as in the ‘openness of the science’ or the ability to understand what taking place within
CRAWL-WALK-RUN APPROACH
and infrastructure investment until the solution has proven itself. This deployment flexibility is appropriate for both the regular ongoing optimisation and the upfront analysis parts of the initiative. Having the ability to run the upfront analysis in-house and not having to rely on an external company for ‘analytical refreshes’ can bea tremendous boon in terms of ongoing cost efficiency, data security and price strategy confidentiality going forward. The recommendation here is to: seek a solution that has the maximum flexibility in terms of deployment options for the entire initiative, allowing in-house and hosted options to be utilised as needed.
sumers
on
A Win-Win
Re
ution Fo l o S
r
The saying goes, ‘it is easiest to crawl before walking’. The same is true of any business change and especially of technology initiatives that enable key business decisions. When it comes to price optimisation, an approach that allows a retailer to move in a stepwise fashion towards full price optimisation can often be prudent, avoiding a ‘big bang’ type approach. This allows the business to build understanding over time, and ultimately build faith and trust. Plus, the associated costs can be spread over time and
tailers & C
TIPS & TRICKS
FLEXIBILITY IN USE Flexibility in use is essential in order to support a progressive crawl-walk-run approach. As part of the design process, there may be a desire to use optimisation
To every action, there is an equal and opposite reaction: consumers have become more conscious of price and retailers have adjusted their positioning accordingly. Considering the need to balance the consumer’s desire for low price with the retailer’s need to maximise value for its shareholders, the adoption of sophisticated solutions has not been as high as some analysts had anticipated. Here’s a practical guide for selecting a price planning & optimisation solution… investment evaluated at each stage. An example of a crawl-walk-run approach would be to select a small subset of product categories to initially work with and build from there. Then, introduce a pricing rules-based approach before utilising more sophisticated price optimisation. The ideal solution would be to combine the two during a rollout by working on rules-based logic for some product categories while using full optimisation for others. The recommendation here is to: seek a solution that allows a crawl-walk-run implementation approach, allowing pricing rules & optimisation to be rolled out.
AN OPEN SOLUTION Being ‘open’ is considered a key
the solution. The recommendation here is to: seek a solution which is open in terms of integration, but allows users to see and understand exactly how a price recommendation is derived.
FLEXIBILITY IN DEPLOYMENT Retailers have differing opinions regarding solutions being hosted or in-house. Which is the best option will vary from project to project. Retailers have shared that it can be useful to have a solution that can initially be deployed, or hosted, externally with the ability to bring it ‘in-house’ at a later date. This offers maximum flexibility as it can avoid concerns over data security as well as minimise hardware
for some categories and use a pricing rules only based approach for others. There may be a desire to run an annual or quarterly review of prices using full optimisation with weekly updates based purely on a rules approach. The recommendation here is to: seek a solution which has the maximum flexibility in terms of usage options— ensuring that differing levels of sophistication can be applied to different parts of the business at different times.
BUSINESS CASE CLARITY To evaluate whether an initiative is a worthwhile investment, a clear business case is required. The business case should include the retailer’s investment alongside the likely return based on proof points from similar retailers. If the
NOVEMBER 2012 • SMART LOGISTICS • 51
Cost-effective strategies, continued
PRICE PLANNING IN RETAIL Using technology to assist with price recommendations is more relevant today. Apart from the wider focus around consumer consciousness of price and increase in commodity costs there are a number of factors that contribute to making price planning and optimisation technology an essential piece of retail artillery. Over the past 10 years, several factors have played a part in influencing this. These include: Number of Products Consumers have demanded more and more choice. Categories that did not exist 10 years ago are now represented in abundance. Even within well established categories, the choice has widened. Take the category of coffee, where, in some cases, the number of discrete SKUs that require price decisions has risen by tenfold in recent years. This increased number of items, dramatically increases the workload associated with making price decisions. Product Complexity Consumers are demanding more choice; as a result there is an increase in differing sizes of the same product. Shampoo, batteries and soft drinks are examples where this is the case. Without careful management, there is a risk of generating unit of measure pricing errors. For example, when the price per battery of a two-pack is cheaper than a four-pack. This sort of error can lead to confusion on the part of the consumer and detract from the price image the retailer. The Price Aware Consumer There is a limit to the number of prices a consumer can memorise for comparison between two retailers. But consumers have technology on their side with the rise of online and mobile price comparison. Smartphones allow consumers to carry this information with them and while it may not be practical for a shopper to review every item’s price, it does add further pressure on the retailer to closely monitor and align their prices with the competition. The Rise of Private Label Attracted by improved margins, grocers in particular, have launched private label products to compete with established national brands. Sometimes multiple private label options exist at the same retailer filling each of the traditional ‘good-betterbest’ pricing slots. As private label brand owner, they must ensure that these products are priced in line with those of their retail competitors. Pricing Strategy Consistency or Deliberate Inconsistency Consistency with private label products in comparison to national brands is needed, but it is also needed between stores and channels. It may be that a localised approach to pricing is adopted by the retailer or differing prices by format or even between store and online. Ensuring consistency means that differing prices between channels or stores are known, understood and deliberate-providing ongoing integrity of pricing tactics used by the retailer.
business case is backed up by a detailed study using the retailer’s own product and sales data, this can further enhance the value, weight and credibility it has. The opportunity to do a pilot based on defined scope and investment can be an attractive option in proving value before investing further. The recommendation here is to: seek a solution from a software provider who will work with you to provide
52 • SMART LOGISTICS • NOVEMBER 2012
a solid business case underpinned by a detailed study of your product and sales data. The software provider should be willing to work with you on a defined scope pilot for a modest and limited initial investment in order to determine true value potential and align it to the business case.
PLANNING PROCESS INTEGRATION Each merchandising lever; price,
promotion, assortment, space and inventory, work best when a common starting demand forecast is used for the planning of each decision. Focussing specifically on price, it makes sense that a solution should not only give an indication of recommended price but the anticipated impact on the demand forecast going forward. The interaction of merchandising decision levers means that there can be significant business process benefits from the use of a single common technology platform to support these decisions. Business process benefits include process consistency and alignment, single workflow enablement and the automatic recognition of interrelated decisions between processes. The recommendation here is to: seek a solution which at the minimum gives a view of the anticipated change in demand alongside the recommended price change. Ideally the solution should enable future expansion to support decision processes associated with other merchandising levers.
NEED FOR A FLEXIBLE SOLUTION With the renewed focus on price, the need and potential benefits offered by price planning and price optimisation solutions are too significant to be ignored. By selecting a solution that is flexible in its approach, a retailer can mitigate against the risks. Flexibility needs to allow progressive deployment and flexible usage whilst being open enough to be easily understood and interpreted. Together, these allow a retailer to comprehensively mitigate against perceived risks and uncertainties associated with a solution. By working with a software provider who is prepared to work on a detailed insight-based business case using the retailers data and a limited scope pilot, a retailer will be wellpositioned to gain significant benefit from price decisionrelated initiatives. The article is an excerpt from the whitepaper, ‘Price Optimization’, by Oracle Corporation.
TRADE SHOW TRACKER EVENT LIST
NATIONAL
ABROAD
21-24 NOVEMBER
20-21 NOVEMBER
20-21 NOVEMBER 2012
CeMAT INDIA 2012 Focus: Trends and Technologies in Material Handling, Storage and Logistics Where: India Expo Centre, Greater Noida, India. Tel: +91 22 40050681/82 Fax: +91 22 40050683 E-mail: tushar.alekar@hmf-india.com
LOGIPHARMA ASIA Focus: Pharma Supply Chain Where: Singapore Tel: + 65 6408 9205 Fax: + 65 6822 7370 E-mail: christine.foo@wbresearch.com
8TH TRANS MIDDLE EAST 2012 Focus: Transportation and Logistics Where: Gulf International Convention and Exhibition Centre, Bahrain Tel: +973 17 713000 Fax: +973 17 712088
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7-9 DECEMBER 2012
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5-8 DECEMBER 2012
INDIA WAREHOUSING AND LOGISTICS SHOW Focus: Logistics & Transportation Where: Auto Cluster Exhibition Centre, Pune, India Tel: +91 120 4273921/43341111/4273921 Fax: +91 11 46520734
INDIA LOGISTICS SHOW Focus: Railway, Shipping & Aviation Where: India Expo Centre, Greater Noida, India Tel: 022 27812093 Fax : 022 27812578 E-mail: ics@indiaconvertingshow.com
INDUSTRIAL AUTOMATION & LOGISTICS INDONESIA Focus: Automation & Logistics Where: Jakarta, Indonesia Tel: 60 3 8023 5352 Fax: 60 3 8023 3963
NATIONAL 23-28 FEBRUARY 2013 PRINTPACK INDIA 2013 Focus: Warehousing & Material Handling Equipment Where: India Expo Center, Greater Noida, India Tel: 0120 4292274 Fax: 0120 2400109 E-mail: admin@ipama.org
ABROAD 30-31 JANUARY 2013
8-11 JANUARY 2013
th
7 PHILIPPINE PORTS & SHIPPING 2013 Focus: Ports & Shipping Where: The Peninsula Manila, Manila, Philippines Tel: +60 87 426 022 Fax: +60 87 426 223 E-mail: enquiries@transportevents.com
PUNE November 2-5, 2012 INDORE January 11-14, 2013
2013 INTERNATIONAL CES Focus: Logistics Software Where: Las Vegas, Nevada, USA Tel: +1 301 694 5243 E-mail: internationalreg@CE.org
CHENNAI November 22-25, 2012
AURANGABAD February 1-4, 2013
LUDHIANA December 21-24, 2012
RUDRAPUR February 23-26, 2013
HYDERABAD May 31-June 3, 2013
Tel: 022-30034651 • E-mail: engexpo@infomedia18.in • Web: www.engg-expo.com
NOVEMBER 2012 • SMART LOGISTICS • 53
EVENT REPORT ENGINEERING EXPO AHMEDABAD 2012
AHMEDABAD October 5-8, 2012 Gujarat University Exhibition Hall
E BB Swain (centre), the Chief Guest, inaugurating Engineering Expo Ahmedabad 2012 in the presence of Sunil Shah (second from left) and Richard Moore (third from left)
pitomising ntrepreneurial xcellence
Gujarat, a manufacturing hub housing a large number of medium & smallscale units (SMEs), multinational companies, etc., has witnessed tremendous industrial growth in the last few years. The recently held Engineering Expo Ahmedabad 2012 succeeded in adding further impetus to this growth by offering the manufacturing fraternity, especially the SMEs in the segment, a perfect platform to boost business and profits. Meeting the expectations of exhibitors and visitors alike, the Expo has reached yet another milestone and promised to define new horizons in its next edition. A report…
AVANI JAIN
GUJARAT, renowned for its vibrant and buoyant economy, has been at the forefront of industrial growth, thanks to the entrepreneurial culture of its people and strong infrastructure focus of its policy makers. In this backdrop, the 11th edition of Engineering Expo Ahmedabad, held from October 5-8, 2012, proved to be a catalyst in accelerating this growth further by bringing the industry veterans from the manufacturing sector, especially SMEs, together under one roof and offering ample business opportunities. Organised by Network 18 Publishing, the Expo has emerged as one of the major trade platforms for the industry.
GRAND OPENING The inauguration function was graced by the presence of Chief Guest B B Swain, Vice Chairman & Managing Director, Gujarat Industrial Development Corporation; Richard Moore, Group Manufacturing Manager, UK Carbon & Graphite Company; Sunil Shah, Chairman, Gujarat Innovation Society; Sudhanva
54 • SMART LOGISTICS • NOVEMBER 2012
Jategaonkar, Associate Vice President, Network 18 Publishing; and Archana Tiwari-Nayudu, Executive Editor, SEARCH, Network 18 Publishing. Engineering Expo Ahmedabad was well-organised. It was not only appreciated by industry veterans from the country but professionals from abroad were also overwhelmed to see an event like this being organised on such a huge scale. Moore averred, “I am surprised at the range of products displayed at this Expo. Some of these products are really good & competitive, which need to be promoted in the European market as well. My message to the exhibitors would be that this is a professional show and you need to take this level of professionalism into your manufacturing plants as well. An event like Engineering Expo is a first step for taking the industry to the next level. The exhibitors should not only focus on India but the world market as well.” During the inaugural session, an exhibitor directory featuring the list of all the exhibitors of Engineering Expo Ahmedabad 2012 was also unveiled.
GUJARAT AS A MANUFACTURING HUB The manufacturing industry in Gujarat has highly evolved over the years. Commenting on the growth of manufacturing sector in the state and the importance of Engineering Expo, Swain said, “Manufacturing is one of the core sectors in Gujarat. The State Government has launched ambitious projects for the sector as the objective is to enhance the growth of the industry. In such a scenario, an event like this can add to the growth of the manufacturing segment as it focusses a lot on the small and medium enterprises. The event is a
Highlights of this edition 225 exhibitors pan India 15,190+ business visitors Business transacted worth
`60.70 crore 13,136 business leads generated
15,000+ products displayed More than 1,00,000 kg machinery moved in for display
good platform for promoting business, branding and trading. It has really grown bigger since last few years and is a one-of-its-kind Expo.”
BRINGING SMEs INTO THE LIMELIGHT The distinguished guests saw this mega trade show as an encouraging initiative from the industry’s point of view. Being the largest SME gathering in the state, the Expo has really helped SMEs immensely. Shah noted, “SMEs in the manufacturing segment have limited resources. So, if they want to travel to different places for gathering knowledge about different products, it would not be feasible for them. Thus, in such a scenario, an event where a cross-section of machinery is displayed under one roof can truly benefit the SMEs. They can not only gather knowledge about different products but also have physical access to the various products and technologies. Thus, such events can really aid the growth of industry.”
generate immediate revenues, these surely help a company in the long run as there is ‘word of mouth’ publicity. Moreover, events like these help us to tap customers who are not from the city where we have our office.” Highlighting the long-term fruitful association with the organisers, Bijal Shah, Director, Sharad Industrial Products Pvt Ltd, said, “We have been participating in the Engineering Expo since last three years. Over the years, the event has become highly professional. The Panel Discussion organised as a prelude to the Expo further increased the credibility of this event.” There was a general consensus that Engineering Expo has highly evolved over the years and becoming better with each edition. Major Amitava Mittra, Chief Operating Officer,
VALUABLE EXPERIENCE FOR EXHIBITORS Being an all-inclusive engineering show, the event provided an opportunity to exhibitors from various Visitors thronging the stalls at the event sectors to spread awareness BGI Engitech Pvt Ltd, said, “The about their products and services. event seems to be a great success. The Bhavin Siddhapura, Chairman, organisers have put in great efforts to Macht Exim LLP, noted, “We first provide us everything we wanted and participated in 2010 and since then on time. I heartily congratulate the we are regular exhibitors in different organisers for putting up such a great editions of Engineering Expo, show.” irrespective of the city in which it is held. It has helped us in brand building and spreading awareness about our DISPLAYING A SENSE OF products, leading to a good number of CONTENTMENT business enquiries.” The event attracted several visitors The exhibitors received an from leading industrial centres in and overwhelming response and generated around Gujarat. Their satisfaction with many leads with potential to generate the show can be gauged from the fact revenues. S J Gijare, General Managerthat most of them are eagerly looking Handling Equipment Division, CTR forward to the next year’s edition. Manufacturing Industries Ltd, said, Ashish Shah, Senior Marketing “Though such exhibitions do not Manager (Materials), InspirOn
Engineering Pvt Ltd, opined, “I have attended previous year’s Engineering Expo as well, and every year, the event has helped us in locating at least four to five suppliers. We would like to attend this event in the future too as such exhibitions really enhance our knowledge about the industry.” Engineering Expo provided a common networking platform for leaders in the industry to showcase their products and this helped the potential customers in taking better business decisions. “Engineering Expo helps us gather information about the various products available in the market. We are able to interact with several companies at one time under the same roof. This event has really helped in the growth of my business,” noted Vijay Patel, Marketing Manager, Prism Group of Company. Another visitor, Dr B S Munjal, Head, Structural & Thermal Analysis Division, Scientist/Engineer - SG Space Application Centre, Indian Space Research Organisation, said, “This Expo has helped us in widening our technical horizons and gathering maximum information about the products we require.” It is not only the organisers and exhibitors who believed that the event has evolved over the time but even regular visitors shared the same sentiment. Satish Prajapati, Proprietor, Conquest Engineering, averred, “What lures us to Engineering Expo is the brand image of Network 18. It really provides an impetus to the event. Every year, the event is getting better than what it was in the last season.” Taking the next leap forward, the upcoming editions of this multilocation trade show are gearing up to offer the best business prospects to one and all. Don’t miss the opportunity! avani.jain@network18publishing.com
NOVEMBER 2012 • SMART LOGISTICS • 55
EVENT REPORT PANEL DISCUSSION: GUJARAT
Flying high with successful strategies After proving its mettle as an industrial hub on the domestic front, Gujarat is emerging as a much sought after investment destination on the global map. In this backdrop, Network 18 Publishing (a part of Network 18 Group) organised an electrifying strategy meet and panel discussion in Ahmedabad on September 28, 2012, as a prelude to Engineering Expo Ahmedabad, which generated impressive industry response. AVANI JAIN
NETWORK 18 Publishing (a part of Network 18 Group) organised an electrifying strategy meet and panel discussion on ‘Gujarat: Poised for a Strategic Shift from Share Taker to Market Maker’ in Ahmedabad on September 28, 2012. The aim of this meet was to discuss the industry prospects and challenges faced as well as suggest some action points to position the state as a truly global destination. This panel discussion was a prelude to the largest SME gathering in the country, Engineering Expo. The panelists, an eclectic mix of experts representing government, industry and academia, included Maheshwar Sahu, Principal Secretary – Industries & Mines, Government of Gujarat; Mahendra Singh Dhakad, Programme Director, United Nations Industrial Development OrganisationInternational Centre for Advancement of Manufacturing Technology (UNIDO-ICAMT); Dr Bakul Dholakia, Director, Adani Institute of Infrastructure Management & Advisor, Adani Group; PK Jha, Zonal GM, National Small Industries Corporation (NSIC); Harit Soni, Director, Ecolibrium Energy; Mehul Pandya, Sr VP & Head, SME, CARE Ratings, and Sunil Shah, Chairman,
56 • SMART LOGISTICS • NOVEMBER 2012
The aim of the panel discussion was to discuss the industry prospects and challenges faced as well as to suggest some action points to position Gujarat as a truly global destination
Gujarat Innovation Society. In his inaugural address, Sahu said, “In order to accelerate its growth prospects, Gujarat needs to be developed as a knowledge economy, which means that there should be increased focus on appreciation of knowledge and value addition. Also, efforts should be made by the industries as well as the government to develop Gujarat as a global sourcing hub. The industries need to focus on sustainable and inclusive growth avenues as it can define new horizons for further comprehensive economic development. Constant innovations and skilled manpower availability are other issues that need attention.” Gujarat being a proven starting base for Micro, Small and Medium Enterprises (MSMEs), the industry experts elaborated on the steps to be taken by them to enhance growth prospects. Dhakad observed, “There needs to be adequate steps taken to accelerate the growth of MSMEs and make them partners in progress. They have remained MSMEs for generations. So, they need to change their attitude and leapfrog to a higher level. Also, they should come forward and take adequate steps to develop R&D centres to accelerate innovations.”
Talking about the steps to be taken by the governing bodies and institutions for the development of MSMEs in the State, Dr Dholakia said, “There needs to be an institutionalised framework for industries with adequate exposure to the latest technologies and business practices available internationally. Above all, one of the unique features of the industrial climate of Gujarat is that neither the government nor the industrialists ask what the government is doing for them, but they believe in making the best from what is available to them.” Adding perspective to the discussion, Shah said, “First of all, the mindset needs to be changed. It starts with referring to MSMEs as emerging enterprises and not tagged as ‘MSMEs’ forever. Moreover, greater emphasis should be on skilled manpower development as it is one of the primary needs of the industry in the current scenario.” The panel discussion was followed by a Q&A session. This was moderated by Archana Tiwari-Nayudu, Executive Editor, SEARCH, Network 18 Publishing. The success of this event can be clearly gauged from the fact that more than 200 people attended this lively panel discussion.
6TH EXPRESS LOGISTICS & SUPPLY CHAIN CONCLAVE EVENT REPORT
A holistic approach to a demand-driven supply chain Today, the role of supply chain officers has evolved and has become critical in managing the set of processes that enable a firm to supply products and services at the right time. Providing a platform to ground-level decision makers, this recently held conclave was conceived & managed by Kamikaze B2B Media with Smart Logistics as its media partner. A report... NISHI RATH
‘NEW World, New Rules, New Ideas’, the theme went perfectly with the happenings at the Express Logistics & Supply Chain (ELSC) Conclave recently held in Mumbai. The 6th edition featured 110 speakers from across the industry who shared their experiences through panel discussions, presentations and case studies. The conclave revealed how one can adapt a business to meet the requirements of the new economic era, drive renewed growth and gain market share. Well-known industry experts like Vinod Srivastava, Director – India Supply Chain & Manufacturing Operations, Lenovo India Pvt Ltd; G Kannan, Head – Logistics, Larsen & Toubro Ltd; Rajesh Nigam, Chief Manager (S&D) HO, Indian Oil Corporation Ltd; Laxmana Murthy, VP – SCM & Purchase, Legrand India Pvt Ltd; Chaitanya Prabhu, Head – SCM, Arshiya International Ltd; Ashok Kumar, Director – Supply Chain, PepsiCo India Ltd and Clifford Patrao, Strategy & Transformation Leader, India South Asia, IBM India, were some of the few who spoke on various topics related to supply chain. More than 550 industry leaders & practioners from the SCM community attended the conclave that also featured an exhibition area which had 30 stalls wherein the supporting companies showcased their products and services.
ELSC AWARDS The much anticipated 6th ELSC Awards was also held during the conclave and were presented by Future
Delegates at a panel discussion at the recently held 6th ELSC Conclave
Supply Chain Solutions. Some of the prominent awards went to the big names for their contributions. Safexpress bagged three special awards for ‘Best Supply Chain Company of the Year’, ‘Best 3PL Company of the Year’ and ‘Best Logistics Provider of the Year – Road’. Vineet Kanaujia, VP – Marketing, Safexpress, said, “The ‘Best 3PL Company of the Year’ Award is a befitting recognition of all the efforts made by us in providing top-class services to our customers.” Blue Dart took home the honours in the categories of ‘Best Air Express Provider of the Year – Domestic’ (Blue Dart Express Ltd), ‘Best Air Cargo Carrier of the Year’ (Blue Dart Aviation Ltd) and ‘CSR initiative of the Year’ (Blue Edge: Empowering Lives Programme). This is not all! In the individual category, Anil Khanna, MD, Blue Dart Express Ltd won the ‘ELSC
CEO of the Year’ award. DHL, on the other hand, received the awards for ‘Best Air Express Provider of the Year – International’ (DHL Express) and ‘Best Logistics Service Provider of the Year – Air Freight’ (DHL Global Forwarding). RS Subramanian, Country Manager, DHL Express, said, “It is a pleasure to receive this industry award as recognition of the tremendous effort put in by our employees at every service touch point.”
ALL’S WELL THAT ENDS WELL According to the delegates present, the conclave was informative and gave insight into the industry from another leader’s point of view. The participants could also connect to some points and learn from their counterparts about the various new trends in the supply chain during the panel discussions. nisi.rath@network18publishing.com
NOVEMBER 2012 • SMART LOGISTICS • 57
TENDERS
Latest Popular Tenders brought to you by www.tendersinfo.com TRUCKS
Loc
: India
Org
: Indian Oil Corporation Ltd (IOCL)
BT
: Domestic competitive bidding
TRN
: 12717849
Desc
: Arranging of tank trucks
BOD
: November 12, 2012
Loc
: India
BT
: Domestic competitive bidding
TIPPER TRUCKS
CARGO SERVICE Org
: East Coast Railway
TRN
: 12766148
Desc
: Loading and unloading of material
BOD
: November 27, 2012
Loc
: India
BT
: Domestic competitive bidding
Org
: Directorate Of Municipal Administration
TRN
: 12759158
Desc
: Supply of auto tipper trucks
JIB CRANE
BOD
: November 16, 2012
Org
: Ordnance Factory Board
Loc
: India
TRN
: 12539244
BT
: Domestic competitive bidding
Desc
: Supply of Jib Crane
BOD
: November 27, 2012
Loc
: India
BT
: Domestic competitive bidding
PALLET TRUCK Org
: South Central Railway (SCR)
TRN
: 12675030
Desc
: Supply of battery-operated truck
BOD
: November 16, 2012
Loc
: India
BT
: Domestic competitive bidding
PROJECT CARGO HANDLING TERMINAL FOR AIRPORT PROJECT
DUMPER TRUCK
Org
: Airports Authority Of India (AAI)
Org
: Central Coalfield Ltd
Project Type
: Construction
TRN
: 12764567
Project News
Desc
: Supply of spares for BH 35-II dumper
: Set up a full-fledged cargo handling terminal
BOD
: November 16, 2012
Loc
: India
Loc
: India
Project Cost
: NA
: Domestic competitive bidding
Implementation Stage : Ongoing
BT
FLAT BED TRUCK
Contact
: Airports Authority Of India (AAI), Rajiv Gandhi Bhawan, Safdarjung Airport, New Delhi - 110003.
Org
: Military Engineer Services
TRN
: 12519750
Desc
: Supply of 25 ton flat bed truck
: apd_vizag@aai.aero
BOD
: November 25, 2012
Tel
: 91-11-24632950
Org: Organisation’s Name, TRN: Tendersinfo Ref No, Desc: Description, DSLD: Doc Sale Last Date, BOD: Bid Opening Date, Loc: Location, BT: Bidding Type.
INFORMATION COURTESY: TENDERSINFO.COM 1, Arch Gold, Next to MTNL Exchange, Poisar, SV Road, Kandivali (W), Mumbai - 400067, Maharashtra, India Tel: +91-22-28666134 • Fax: +91-22-28013817 • Email: parmeet.d@tendersinfo.com
58 • SMART LOGISTICS • NOVEMBER 2012
PRODUCT UPDATE
This section gives information about products, equipment and services available in the market. If you know what you want. . . refer to Product Index on Page 64 to find it quickly
DOCK LEVELER
T
he dock-leveler has whole drive unit contained in a wall box, which is installed on a wall inside the warehouse, at eye level. It allows for easy and economical maintenance, without the necessity to maneuver under the platform or inside the pit where traditional power packs and controls are usually installed. Depending on the type of installation it can hydraulically power several dock-levelers with only one consolle (drive unit). Each dock-leveler is controlled separately by its own control pad. They can also work simultaneously. Reducing the electric mains supply points to one per consolle instead of one per dock-leveler helps from the economic point of view. There is a 65% reduction in dock-leveler installations and about 75% in dock-leveler and powered sectional door installations. Th is reduction normally results in important economies while installing the mains distribution box. Consequently by reducing the number of motors there is a dramatic saving on electricity costs, as the global mains power engagement is radically reduced.
Gandhi Automations Pvt Ltd Mumbai, Maharashtra
Tel: 022-66720200/66720300 Fax: 022-66720201 Email: sales@geapl.co.in Website: www.geapl.co.in
BARCODE PRINTER
B
arcode Printer offers features available in industrial printers but at a desktop printer size and price. It is the best solution for grade label and receipt printing. The Pro+ offers a locking media cabinet and sufficient internal media capacity to hold a 7.2-inch roll of media or stack of fan-folded media. It is also equipped with fast print speed, real-time clock, audible alerts and large display. Datamax-O’Neil California, USA Tel: 949-458-0500 Fax: 949-458-0708 Web: www.datamax-oneil.com
Invites You To India’s Largest
SME Gathering
NOVEMBER 2012 • SMART LOGISTICS • 59
Product update, continued
HYDRAULIC PALLET TRUCK
H
ydraulic pallet truck is of high quality engineering and heavyduty construction. It is an economical solution for handling heavy loads. The frame is made of heavy duty formed steel, jig welded and forks of double fl anged pressed steel which gives maximum strength. Ram and pump plunger of the hydraulic cylinder is grounded to high precision and hard chrome plated which reduces wear and resists from corrosion. Special safety valves are provided for smooth lowering of load and a dual overload safety valve is provided to protect the truck from damage due to overloading. Ferro Foundries Pvt Ltd Mysore, Karnataka Tel: 821-2402376, 0821-3048000 Mob: 09845120878 Email: info@ferrotiger.com Web: www.ferrotiger.com
TRUCK LOADING CONVEYOR
T
he truck loading conveyor is used for loading/unloading bags, cartons, boxes, crates, etc. from trucks. It comes with completely motorised operation with operator control panel on loading/ unloading end. The height of the loading and unloading ends can be changed, independently. The conveyor is completely mobile, mounted on sturdy wheels for easy mobility. It has telescopic arms for greater reach inside the truck. The truck loading conveyor has a choice of powerised rollers or heavy duty belt, choice of various belts depending on the application, choice of lighting on the conveyor to facilitate unloading/loading of containers, etc.
Aravali Engineers Noida, Uttar Pradesh Tel: 0120-2401105 Email: sales@aravaliengineers.com Website: www.aravaliengineers.com
200+ participants | 15,000+ business visitors expected 8,000+ products on display | Business transactions worth ` 48 crore expected | Spread over 4200 sq mtr | Showcasing more than 30 diverse industry categories.
Exhibitor Profile
CHENNAI
22 - 25 November 2012 Chennai Trade Centre 10 am - 7 pm
60 • SMART LOGISTICS • NOVEMBER 2012
Auto & Auto Components | Chemicals & Allied Products | Testing & Measuring Instruments Electrical & Electronics | Hydraulics & Pneumatics | IT Products & Services | Automation | Instrumentation | Material Handling Equipment | Packaging Machinery | Wires & Cables Machine Tools & Accessories | Pipes & Fitting | Plastics & Polymers | Safety & Security | Process Machinery & Equipment | Light & Medium Engineering
METAL PALLET
accessories so that the flooring systems can be adapted to suit users’ specific needs. Also offered is a wide span mezzanine floors for 100 per cent doubling of floor space. These flooring systems are quick, easy and costeffective.
T
he Venture-445 is a metal pallet available in two models with/without MS sheet platform in mild steel in order to avoid wooden pallets to save trees. Some of the advantages include: protect trees and save nature, lightweight and heavy-duty, stackable and save transport cost for movement of empty pallets, long life and cost-effective, reusable and longterm savings, export ready, resale value even in scrap condition, maintenance-free, customisation based on requirements, can be used on all four sides by hand pallet and fork lift, good strapping with the product, weather-proof, and other value-added features.
Pushpak Products India Pvt Ltd Bengaluru, Karnataka Tel: 080-28382031 Email: vision@pushpak.co.in Website: www.pushpak.co.in
Pilco Storage Systems Pvt Ltd New Delhi Tel: 011-27110024, Email: sales@pilcoonline.com Website: www.pilcoonline.com
CAGE PALLET
C
age pallet is completely designed with extreme quality raw material and are procured from renowned industries. Th is cage pallet comes in different specifications with respect to its application. Base is made of MS
MEZZANINE FLOORING SYSTEMS
F
lexibility in design permits quick dismantling and re-erecting in new locations or indeed extension of existing structures. The company provides a full range of
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NOVEMBER 2012 • SMART LOGISTICS • 61
Product update, continued
tubular structure with sides of wire mesh provided at the bottom for forklift or pallet truck entry. It is a self-cleaning see-through pallet and can be stacked one upon the other. Wire mesh container is stackable and totally collapsible. The wire mesh pallet is used in automobile industries as well as warehouses of large factories. It has up to 1000 kg weight bearing capacity with even load distribution. Ahlada Industries Pvt Ltd Hyderabad, Andhra Pradesh Tel: 040-23094301, Email: industries@ahlada.com Website: www.ahlada.com
Platform trolleys are available in capacity from 250 to 2000 Kg and roll effortlessly on 2- swivel, 2 rigid heavy duty casters. Ambika Enterprise Mumbai, Maharashtra Tel: 022- 4023566 Email: ambica.response@gmail.com Website: www.ambika.com
PLATFORM TRUCK AND TROLLEY
P
latform trucks for heavy weight transportation around the warehouse, plant or office. Made out of M.S. Sheets, angles, fl ats, pipes, etc. These Platform truck are provided with convenient tubular pull handle and roll effortlessly on 4-pneumatic wheels. All welded construction ensures a super strength available capacity from 500 to 5000 Kg.
BARCODE READER
U
sing barcode reader with 2DMax+ technology, readers can identify and decode severely damaged or poorly marked 2-D matrix codes. Most importantly, the barcode readers are unaffected by variations in lighting, marking method, code quality or surface fi nish. “2DMax+ is a proven breakthrough in 2-D decoding. Th is functionality is especially helpful in pharmaceuticals, food, beverage and consumer goods packaging sectors. Barcode reading in these industries are often challenging due to poor print quality, varying part sizes, curved surfaces and labels damaged by environmental factors or supply chain activity. 2DMax+ helps these users achieve the highest
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62 • SMART LOGISTICS • NOVEMBER 2012
reading yields and maximise throughput. 2DMax+ can read Data Matrix codes even when critical elements are missing. It can also locate and decode Data Matrix codes that are over exposed or underexposed, without requiring multiple retries. Th is improves throughput, speed and overall reliability. Cognex Sensors India Pvt Pune, Maharashtra Tel: 2040147840 Email: sisd.support.asia@cognex.com Website: www.cognex.com
GOLIATH CRANES
T
he single girder and double girder Goliath cranes conform to IS:807-1976, IS:3177-1977, IS:3938-1983 and IS:4137-1963 standard wherever applicable. These cranes are manufactured up to 50 ton capacity and for 40 m span. Grabbing cranes are designed to suit indoor or outdoor location and can also be supplied with grab buckets, electromagnets. Goliath cranes are designed to run on forged steel wheels running on L-type housing on anti-friction roller bearings. These cranes are suitable for control from floor, by means of pendant controller or from the driver’s cabin by means of master controller or through radio remote control. speed reducers and is coupled to a grooved steel drum. Electromagnetic brakes are used to control the smooth lifting of weight. AC drive is also provided (on demand) for smooth operation of long travel. The hook is equipped with a forged steel forked revolving hook. Wire rope is of 6 x 37 construction.
Elmech Engineers Mumbai, Maharashtra Tel: 022-2352 1798/2710 Email: eddycranes@vsnl.com Web: www.elmechengineers.com
EOT CRANES
T
he rational structure of the crane is of box construction adequately designed and reinforced by stiffening ribs. It is connected with bridge trolley, which is moved by motors, coupled up with speed reducers. The crab carriage is in the steel section. It comprises of special crane duty motor, connected to
Friends Engineering Works Udaipur, Rajasthan Tel: 294-2492200, 294-2494379 Mob: 09829042424 Email: info@friendseng.com Web: www.friendseng.com
The information published in this section is as per the details furnished by the respective manufacturer/distributor. In any case, it does not represent the views of
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eg. SL Forklift and send it to 51818 NOVEMBER 2012 • SMART LOGISTICS • 63
PRODUCT & ADVERTISERS’ INDEX NDE DE
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To know more about the products & advertisements featured in this magazine, write to us at b2b@infomedia18.in or call us on 022-3003 4640, and we will send your inquiries to the companies directly to help you source better. Products
Pg No
Aluminium crane system .................................................................59 Auto FLC ..........................................................................................4 Barcode printer.................................................................................59 Barcode reader ..................................................................................62 Cage pallett ......................................................................................61 Cold form C and Z purlin ...........................................................FIC Conveyor logistics management .........................................................3 Damco logistic .................................................................................19 Dock leveler .....................................................................................59 EOT crane .......................................................................................63 Fleet management service .............................................................BIC Foldable plastic crate ..........................................................................4 Folding large container (FLC) ...........................................................4 Goliath crane....................................................................................63 Heavy industrial steel building......................................................FIC Hydraulic pallett truck .....................................................................60 Liquid transportation service ...........................................................60 Logistics service .......................................................................... 7,BC Metal pallet ......................................................................................61 Advertisers’ Name & Contact Details
Pg No
Alpha Analytics Services Pvt Ltd
BIC
Products
Pg No
Mezzanine flooring system ..............................................................61 Multi level car park .......................................................................FIC Pallet truck .......................................................................................60 Pallet..............................................................................................4,63 Platform truck and trolley................................................................62 Poly carbonate sheet......................................................................FIC Pre engineered steel building ........................................................FIC Pre fab shelter ...............................................................................FIC Residential steel house ..................................................................FIC Roof vent .......................................................................................FIC Roofing and cladding sheet ..........................................................FIC Search SME guide ...........................................................................27 Specialized storage and transport ....................................................19 Structural floor decking sheet .......................................................FIC Truck loading conveyor ....................................................................60 USS univent ..................................................................................FIC Vehicle mover ...................................................................................59 Vehicle tracking service .................................................................BIC Warehousing service .........................................................................59
Advertisers’ Name & Contact Details
Pg No
HH Hamburg Marketing
21
Advertisers’ Name & Contact Details
Pg No
Sintex Industries Ltd
T: +91-20-25897063
T: 91-22-666-52134
T: +91-2764-353500
E: vivek.rane@alpha-analytics.com
E: deubet@indo-german.com
E: pallets@sintex.co.in
W: www.alpha-analytics.com
W: www.portofhamburg.com
W: www.sintex-plastics.com
Chep India Pvt Ltd
4
Network18
8 W: www.network18online.com
T: +91 022 67839400
63
SME Guide
27 T: +91-022- 3003 4650 E: b2b@network18publishing.com
E: Savio.Pimenta@chep.com W: www.chep.com Damco India Pvt Ltd
19
Safexpress Private Ltd
7, BC
United Steel & Structurals Pvt Ltd
FIC
T: +91-022-33088249
T: +91-1800-113-113
T: +91-44-42321801
E: Commercial.India@damco.com
E: suyash.srivastava@safexpress.com
E: admin@unitedstructurals.com
W: www.damco.com
W: www.safexpress.com
W: www.unitedstructurals.com
Engineering Expo
6
T: +91-9819552270 E: engexpo@infomedia18.in W: www.engg-expo.com
Schaefer Systems International Pvt Ltd T: +91-022-61114700 E: schaefer@ssi-schaefer.in W: www.ssi-schaefer.in
3
VRL Logistics Ltd
19
T: +91-836-2237511 E: headoffice@vrllogistics.com W: www.vrllogistics.com
Our consistent advertisers COC = Cover-on-Cover, FIC = Front Inside Cover, BIC = Back Inside Cover, BC = Back Cover
64 • SMART LOGISTICS • NOVEMBER 2012
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 Aluminium crane system
Mezzanine flooring system
Auto FLC
Multi level car park
Barcode printer
Pallet truck
Barcode reader
Pallet
Cage pallett
Platform truck and trolley
Cold form C and Z purlin
Poly carbonate sheet
Conveyor logistics management
Pre engineered steel building
Damco logistic
Pre fab shelter
Dock leveler
Residential steel house
EOT crane
Roof vent
Fleet management service
Roofing and cladding sheet
Foldable plastic crate
Search SME guide
Folding large container (FLC)
Specialized storage and transport
Goliath crane
Structural floor decking sheet
Heavy industrial steel building
Truck loading conveyor
Hydraulic pallett truck
USS univent
Liquid transportation service
Vehicle mover
Logistics service
Vehicle tracking service
Metal pallet
Warehousing service
First Fold Here
Second Fold Here
Alpha Analytics Services Pvt Ltd
HH Hamburg Marketing
Chep India Pvt Ltd
Network18
Damco India Pvt Ltd
Safexpress Private Ltd
Engineering Expo
Schaefer Systems International Pvt Ltd
Third Fold Here
GLUE
ADVERTISERS’ INQUIRY FORM
Please complete the following & get a quick effective response from suppliers:
1. Your company’s business function is ( one only) K Wholesalers K Manufacturer K Distributor K Agent K Other, please specify ______________ 2. Your role in your company’s buying process can best be described as: K I buy K I identify potential suppliers K I approve purchases K I negotiate contracts K I select suppliers. 3. Your line of business 4. Specific product requirement Name: Designation: Company Name:
City:
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Tel:
Fax:
Email:
11 / 2012
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