LOG.India April 2011 Issue

IndIa’s LeadIng LOgIstIcs MagazIne www.logisticsweek.com

INDIA

April 2011 Vol. 4 — No.8 October 2010 | Vol. 4 – No.2

`100

` 100

Method In Motion

amit mukherjee, Vicepresident (iT and supply chain) and group cio at rpg, has deployed exemplary supplychain strategies at spencer‘s retail >> page 34

LIFE SUPPLY How Atul Agarwal, Associate General Manager (Supply-Chain), Dabur India Ltd., runs a lean supply-chain for its over 300 products.

TElEcom logisTics 20

TOWERING Movement ofABOVE telecom 38 network equipment opens Unravelling India’s telecom alogistics, windowend of to opportunity end.

low NEglEcTEd Page 24 adopTioN 24 waTErways 44 GOOD TOdoes GO: GST Bill looks well on its India way. is The industry weighs in...10 Why WMS still ignoring inland notSTOPWATCH: have enough waterways at its own Warehouses need to set labor standards. Here’s why...20 takers in India peril RIGHT MOVES: What goes into choosing the right location for a warehouse...46

eDITORIAL

>

What Goes Around, Comes Around

L

ast year, at the time of putting together our first warehouse handbook (disclosure: this editorial is not to plug our latest warehouse handbook), I got in touch with several domain experts, and requested them to write a chapter each on a topic of interest. Accordingly, I got in touch with an expert who I regard as a talented and an accomplished consultant and requested him to write on warehouse design. The expert didn’t appear very thrilled with the prospect.

He said, “In the logistics sector in India, I have seen that a lot of ‘so-called’ domain experts look to borrow other people’s ideas rather than working to evolve and execute their own. If I write my thoughts on warehouse design, I may risk giving away some of my ideas for which companies pay me. Worse, there are people out there who will blatantly copy them, without understanding the fundamentals, and end up ruining the experience.”

He further told me that he has already had a bad experience with a column he had written for a newspaper – he found out that some people had been passing off his ideas (revealed in his column) as their own.

That set me thinking: Is this a common issue with domain experts in our industry? That they are wary of sharing their ideas with the media? From my point of view, and the limited experience I’ve had studying and working with our management and business publications, I think the answer is yes.

This issue is not only limited to the experts or to the field of logistics, even companies in India across industries have long been wary, almost paranoid about sharing their management practices with the Indian media. Even when they do, it is calibrated – there is precious little that the readers can learn from the shared information.

How often do we read a case study, or an Indian CEO’s interview, or an in-depth article from a practicing consultant that opened our eyes to the essentials of a subject? I am not talking about paid research reports, or articles in select management/scientific journals meant for peer-evaluation. I am referring to content that is open for all to read and use. As innocuous as this issue appears, it has a huge bearing on the quality of products and services that we see and consume as professionals and users. Above all, it harms the keepers of the information the most – a great example of the laws of karma at work. Take the issue of warehouse design. I know many talented consultants who are not getting enough work in this area. They attribute it to a general lack of awareness among warehouse owners and logistics professionals in warehouse design. Now you know where I am going with this. The point is that if the experts don’t talk about warehouse design – giving away the fundamentals, making a case for warehouse design in a transparent, lucid and convincing way – what they will get is a general sense of apathy on this subject. As for the fear of people stealing ideas, they need to realize that no amount of idea-thievery can beat tenacity and domain experience.

I will give you another quick example. For long, logistics magazines (like the one in your hand) have been publishing content

www.twitter.com/logisisticsweek

only for, to, and about the logistics service providers. Why? Because Indian companies have long been wary of sharing their supply-chain information with the media for various reasons – some owing to the nascent nature of the logistics industry, some owing to the mediocre quality of media reporting.

Exactly a year ago, we at Log.India tried changing the norm. We decided to do stories on supply-chain models of companies. In other words, we started doing ‘enterprise’ supply-chain stories (which is the norm across the developed world). As expected, it was not Aanand Pandey easy. After failing to convince Editor a few big companies to part with their SCM info, we tried, to use a military term, the ‘shotgun’ approach.

We made a long list of companies from FMCG, pharma, retail and other such sectors and started flooding them with our requests, trying to convince them that they could trust us with all the critical SCM information.

Our big break came with HyperCity Retail when Col Vijay Nair saw it before anyone else how his SCM practices could benefit the industry. It seems that the HyperCity story opened a floodgate. Ever since, we have done stories on many big companies such as GCPL, Dell India, Ericsson India, Tata Motors and now, Dabur. The idea is that companies share their SCM best practices, the LSPs gain from the knowledge and use it to improve their quality of service, which in turn benefits the users in general.

And now has come the time for us at Log.India to turn it up a notch. We have realized that it’s high time we celebrate India Inc.’s SCM success stories and honor our heroes who make them possible.

Therefore, on May 20, we will be presenting arguably India’s first ‘enterprise only’ SCM awards – the India International Logistics Forum (IILF) awards.

See you there.

Aanand Pandey aanand@logisticsweek.com

www.facebook.com/logisticsweek

INDIA |

April 2011 | www.logisticsweek.com 5

Contents 18 upshot

And The Twain Shall Meet Two events, the SCLC's summit on private equity in logistics sector, and M+R Spedag's acquisition of PL Shipping & Logistics, were the highlights of the month.

24 Cover story the Chain Is the Link

Running a complex supply-chain, not to mention managing over 300 products could deter even the most dauntless. For Atul Agarwal, AGM (SupplyChain), Dabur India, it is all in a day's work.

24 18

36 IntervIew Gunning For Green

20 Column

Measure For Measure Companies employ workforce based on the amount of work they perceive. But is the workforce gainfully utilized at all times?

Calculating a time and motion study can help.

A tête-à-tête with Christopher Ong, VP- Business Development, for DHL Asia Pacific, Eastern Europe, Middle East and Africa (EMEA), on its GoGreen initiatives and progress.

38 Feature Making Waves The advancements made by India in the telecom industry have placed it on a high growth trajectory.

The breakneck speed of operations have put people employed in this sector on their toes, in terms of bringing in change or adapting to changes.

20 6

INDIA |

April 2011 | www.logisticsweek.com

38

aprIl 2011 46 Feature

Selecting Your Warehouse's Location With costs exploding in the market, the location of a warehouse is crucial for an organization’s profitability. With the sophisticated tools available today, a distribution network can be optimized.

ADVeRtIseRs InDeX 3rd Annual Supply Chain Summit .............................15 BLR ......................................................................... 33 Capricorn Logistics .........................................56 & 57 Drive India Enterprise Solution .............................. IFC EXIDE Industrial .......................................................17 Gandhi Automation .......................................... 11 & 65 Greenearth Translogistics.........................................19 India Warehousing Show 2011 ................................ 59 Mahindra Navistar .................................................. IBC Man Force Trucks....................................................BC 6th Southern Asia 2011........................................... 65 Strategic Procurement & Pricing ............................. 64 Safexpress .............................................................. 23 State Bank of India .................................................... 3 Shree Rajlaxmi ............................................... 27 & 29 SSI Schaefer ..................................................... 60-61 Vijay Logistics ........................................................... 4 Vodafone ............................................................. 8 & 9 IILF Award ................................................................13

marCh 2011

46

IndIa’s LeadIn

March 2011 October 2010

52 panorama

MagazIne gisticsweek.com

`100 ` 100

Method In Motion

50 BooK eXtraCt The petroleum industry has invested considerable effort in developing sophisticated mathematical programming models to help planners provide strategies and directions for refinery operations.

g LOgIst Ics www.lo

DIA IND IA

Vol. 4 — No.7 | Vol. 4 – No.2

amit mukh erjee, Vicepresident (iT and supp ly chain) and group cio deployed exem at rpg, has plary supp chain strate lygies at spen cer‘s retail >>

A MAN O METTLE F page 34

Abhijit Chau dhuri, Direc tor Industries Ltd., has succe (SCM), Ispat ssfully mana Ispat‘s supp ged ly-chain unde TElEc om r testing cond The story itions. logisTics .20 low

THING

Movement S TO of telecom BE 42 network Experts weigh equipm in ent on opens alogistics windowindustry of opportu trends. nity

reGulars

analysis

10

Page adopTioN 30 24 ICTT ON:

NEglEcTEd

Why WMS still The does waTErway notOVER have enough much-awaited Vallarpadam s 44 THE CUBIC termina India is ignoring takers in India l is open. inland A report...20 MOVING STOR LE: Why cross-functiona waterwa ys is l trust atcritical its own IES: The SCM peril to SCM...24 of the popular online book vendor Flipkart ...26

events

66

APRIL 2011

Books, Journals, Blogs, Technology, C-Profile, and Solutions - a look at what's new in and for the supply chain industry.

INDIA |

April 2011 | www.logisticsweek.com 7

RNI No. MAHENG/2007/23777 l Registration No.MH/MR/South-279/2011-13 Allowed to post at Patrika Channel Sorting Office G.P.O. Mumbai - 400001 Date of mailing: 5th of every month issue

68

< AnAlysis

Train of ThoughT

The biggest issue is the absence of an efficient supply chain.

Moving products from one place to another is difficult. Then, there’s a complex taxation structure, making things worse.

Add to that the worry of real estate.

— Raj Jain, President, Wal-Mart india in an interview to Business Standard.

The railways have a lot of benefits in terms of wear and tear, and faster network. Although rail transport is a good option and the industry wants to explore it, they will have to make it cheaper and cost effective. Logistically, the industry needs to have more details.

— Vishnu Mathur, Director-General, siAM on the lack of clarity in Railways’ freight business in an interview to Mint.

We don’t have the legacy of the old stuff to protect. Older companies have installed the established way of doing it. We’re all about the future. It’s all about return on investment for the customers.

— Michael saul Dell, CEO, Dell on ways Dell differentiates its offerings in the IT space in an interview to Corporate Dossier.

Look, It’s Moving The much-awaited GsT, that can help india’s economy with gains of over $1 trillion, finally looks to have gained momentum. However, it is not likely to be rolled out before June next year, reports Frewin Francis

T

he month of March saw two important cornerstones laid on the road to GST (Goods and Services Tax) implementation – both in quick succession. On March 22, the Government tabled the Constitution Amendment Bill for GST in Lok Sabha, just a week after the Union Cabinet green-lighted the Bill. The road to GST, however, still looks beset by challenges. The GST rollout has already missed this year’s target of April 1, and it looks highly unlikely that it will meet the new deadline of April 2012.

The Bill is expected to go to a standing committee of the Parliament, headed by Yashwant Sinha, for scrutiny. The committee will send the Bill back to the Parliament with recommendations that the Parliament is not bound to accept.

The whole process is not expected to finish anytime before the monsoon session of the Parliament. Hopefully, if the Bill is passed by the Par-

10

INDIA |

liament, it will have to be cleared by not less than half of India’s states.

Following which, the Bill stipulates the formation of a GST Council headed by the Finance Minister and the respective finance ministers of every state. The Council will decide on tax rates, exemptions and threshold limits, where every recommendation will be passed through general consensus among its members. The GST council is to be set up through a Presidential order within a few months after the Bill in passed in the Parliament and the State assemblies.

Then there is the issue of getting in place an IT infrastructure

April 2011 | www.logisticsweek.com

< AnAlysis

The Bill also stipulates the forming of a GST Dispute Settlement Authority that will address the grievances of the Centre and the States on matters related to GST.

that can handle the transition.

While presenting the Union Budget 2011-12, Finance Minister Pranab Mukherjee stressed on the importance of computerization of commercial taxes. He stated that initiatives like ‘Mission Mode Projects’ for computerization of Commercial Taxes in States will allow the states to align with the rollout of GST. Funds have been released for 31 such projects received from the States and Union Territories.

Also, the Central Government has set up an Empowered Group under the chairmanship of Nandan Nilekani to finalize the design of appropriate IT system for the GST regime. The Group has proposed to the Ministry the setting up of a system termed

as ‘National Information Utilities’ which would be made through Special Purpose Vehicles (SPVs) with private partnership. These SPVs would be creating integrated databases interlinking all IT projects in the areas of Goods and Services Tax, among other things.

According to recent media reports, the government is thinking of f loating an SPV to create an IT infrastructure for GST. The SPV, called GST Net, will have National Securities Depository (NSDL) as its technology partner. According to reports, NSDL will start a pilot project on GST in 11 states.

About The Bill The Bill makes its goal clear with its ‘Statement of Objects and Reasons’ that says,

among other things, “The goods and services tax would replace a number of indirect taxes presently being levied by the Central Government and the State Governments and is intended to remove cascading of taxes and provide a common national market for goods and services.”

As for the nitty-gritty, the Bill seeks to subsume the Central and State indirect taxes and levies like Central Excise Duty, Additional Excise Duties, Service Tax, Countervailing Duty (CVD) as well as State Value Added Tax (VAT)/ Sales Tax, Luxury Tax, State Cesses and Surcharges and Entry Tax (not levied by local bodies) will be subsumed under GST (See the box ‘GST Bill Highlights’). Apparently,

Source: prsindia.org

GST Bill Highlights The Constitution Amendment Bill recently tabled in the Lok Sabha provides for:  The Bill proposes a dual structure – one for Center and other for States.  Tax rates, exemption lists and threshold limits to be decided by a GST Council.  Covers goods other than crude petroleum, diesel, petrol, aviation turbine fuel, natural gas, alcohol (for human consumption).  Various Central and State indirect taxes and levies like Central Excise Duty, Additional Excise Duties, Service Tax, Countervailing

Duty (CVD) to be subsumed under GST (excluding those applicable to goods excluded from GST).  State VAT/Sales Tax, Luxury Tax, State Cesses and Surcharges and Entry tax (not levied by local bodies) to be subsumed under GST.  Parliament to provide for the establishment of a GST Tax Dispute Settlement Authority to adjudicate any dispute or complaint referred to it by a State Government or the Government.

While trading hubs like Delhi might tend to gain, manufacturing hubs like Maharashtra, Gujarat and Tamil Nadu might see a different implication with excise and other taxes getting wiped off."

— nihar Parida, COO, Logistics & Marketing), Uniworld Logistics

the component of taxes like Octroi and entertainment tax that are levied by local bodies will be outside the GST ambit. In other words, the industry may not see the complete abolishment of Octroi, a much-opposed tax, as per the Amendment Bill.

What’s more, it excludes products like petrol, diesel, crude petroleum, aviation turbine fuel (ATF), natural gas and alcohol (for human consumption) from GST’s purview.

The Bill also stipulates the forming of a GST Dispute Settlement Authority that will address the grievances of the Centre and the States on

in 1954, GsT WAs inTRODuCED fOR THE fiRsT TiME in fRAnCE. 12

INDIA |

April 2011 | www.logisticsweek.com

< AnAlysis matters related to GST. The authority will be chaired by a retired judge of the Supreme Court or the Chief Justice of a High Court, to be appointed by the President on the recommendation of the Chief Justice of India.

What it Means for The industry Talking about the introduction of the Bill in the Parliament, Nihar Parida, COO, Logistics & Marketing, Uniworld Logistics, said that companies are taking it in the

same way as they did during the time of implementation of VAT. How the States will take to the new amendments is unclear, he said. Mr. Parida further stated that while trading hubs like Delhi might tend to gain, manufacturing hubs

like Maharashtra, Gujarat and Tamil Nadu might see a different implication with excise and other taxes getting wiped off.

On being asked how companies are bracing themselves for GST, Srinath Manda, Pro-

Ready for GST? Gagan Seksaria, Associate Director (Transportation & Logistics), KPMG, offers some pointers on how companies can ready ready themselves for GST. While there is disappointment in some quarters about delays in the implementation of this lead time, businesses must realize that the transition may be quite challenging and therefore they should use this lead time to get a grip on their entire operation and of doing a detailed impact analysis of functioning in the proposed GST regime.

The design of the GST is already in the public domain and there is sufficient information available to do model simulations and appreciate the pros and cons, and of course the concern areas. As a first step, businesses would do well for themselves in setting up cross-functional project teams â&#x20AC;&#x201D; having, apart from finance, representation from the marketing, logistics and IT functions. This team should work on a milestone-based time bound transition plan while ensuring that different functions are continually sensitised to the possible implications of GST in their respective domains.

Businesses, with the help of crossfunctional project teams, may find the following guidelines useful to undertake the following preparatory steps towards their smooth transition into the GST regime.

1. Business Operation And supply Chain simulations: It is crucial that businesses undertake an extensive mapping of their existing business operations and supply chains. This should include

preparation of product-wise/state-wise matrices to be able to map the entire procurement and distribution structure in turn to get an understanding of the changing tax triggers and quantum and create basis for critical decision making.

2. Pricing: Suppliers of both goods and services will now have to determine the valuation and pricing of their products as the bases of indirect taxation shifts from manufacture to supply. Complete crosscredit will be allowed between goods and services and this will result in a greater credit pool and cost saving, in turn affecting pricing decisions.

3. financial impact Analysis: It will be critical for companies to do a financial impact analysis of their businesses with the new regime in mind. It would be ideal to run simulations on the basis of actual figures of the preceding fiscal to get a detailed understanding of how the operations and numbers would have looked different if GST were already in place. Such a comprehensive exercise shall prove useful towards the evaluation of all operation options and supply chain patterns with multiple permutations and combinations with respect to tax, pricing and bandwidth. Businesses also need to understand how the existing tax exemptions (which it presently enjoys) if withdrawn or modified, would impact their bottom lines, particularly in respect of the area-based excise exemptions.

Similarly, it would be prudent to examine the pricing structures evolving with the changing taxation structures.

4. Contracts & Agreements: An important area of examination should

be the existing agreements and contracts with customers and vendors and whether they appropriately account for the potential applicability of a GST within 12 months time.

5. Compliance: Suppliers of goods and services will now have to come under the ambit of both Central and State government and register with both authorities.

Currently service providers would only need to register with central government.

The industry will have to ensure that compliance with the new tax legislation is met and that they are prepared to do so within the next 12 months. Businesses must also critically evaluate the tax, audit and finance consultants they seek services from today and whether these suppliers continue to be effective and relevant in the GST set up.

6. iT-Readiness: Businesses will have to examine and potentially modify or upgrade their IT infrastructure and setups to support the changed regime. The incidence of the tax will change and so will the credit mechanism and the ERP systems must be modified to reflect this change.

7. stakeholder inclusion: It is imperative, once the specific impact of GST is well understood internally, to initiate discussions with the customers and vendors to be able to iron out any pointy operational areas that might crop up after the GST implementation.

8. Training: Relevant individuals in finance, procurement, operations, IT and sales department will have to be trained to bring them up to speed with new legislation, its effects and its compliances.

THE fiRsT inCOME TAx suGGEsTED in THE uniTED sTATEs WAs DuRinG THE WAR Of 1812.

14

INDIA |

April 2011 | www.logisticsweek.com

< AnAlysis

Critical supply-chain functions such as warehousing, logistics and distribution are some other key areas that would be directly and positively impacted with the introduction of GST.

gram Manager, Automotive & Transportation, Frost & Sullivan (South Asia & Middle East) said, “Due to the uncertainty of the final tax structure, administrative policies and the timeline of implementation, most companies are adopting a ‘wait and watch’ approach regarding GST. Furthermore, since large companies with manufacturing units in multiple states are likely to be impacted more than small companies with a single man-

Companies will have to adopt more advanced IT solutions and larger and more advanced infrastructures."

— Christoph Remund, CEO, DHL Global Forwarding

ufacturing unit, the majority of small companies are not taking a serious note of the developments.”

Apparently, a number of logistics service providers (LSPs), on their part, are planning ahead in anticipation that the GST regime would most likely offer opportunities in the form of nationwide transport services and large warehousing infrastructure.

For all the companies in the industry, thus far, an inability to offset the input excise duty and service tax against the output tax has lead to the cascading of taxes. Moreover, a lack of uniformity in State VAT laws with respect to rates of taxes, threshold limits, compliance requirements, etc. has lead to unnecessary compliance burden on them.

Pradeep Chechani, Business Head and Vice President (Supply Chain) at Wadhawan Retail feels that, from an operations perspective, GST is definitely going to make life better for the logistics professionals. Complications like multiple points of control and various tax-related documentation would get minimized.

Critical supply-chain functions such as warehousing, logistics and distribution are some other key areas that would be directly and posi-

tively impacted with the introduction of GST. Currently, most companies prefer to maintain decentralized warehouses across states to avoid sunk cost of central sales tax, leading to high operational costs.

To a large extent, the new regime would also mean that there will be cost reduction at the point of origin. Companies and business too would have to gear up their operations to accommodate GST. Gagan Seksaria, Associate Director, Transportation & Logistics at KPMG points out some of the ways in which he feels companies can brace themselves for GST (See box: Ready for GST?).

Commenting on the proposed rollout of GST, DHL Global Forwarding Chief Executive Officer Christoph Remund opined that companies will have to adopt more advanced IT solutions and larger and more advanced infrastructures. Companies that quickly adapt to the changing scenario will not only differentiate themselves, but also successfully capture this major growth opportunity.

Percy Avari Country Manager, Aramex International (India Regional Office), stated that finding and organizing large sized organ-

The coalition government is dealing with the GST issue rationally by alleviating any misconceptions and feedbacks from all affected parties via the GST Council."

— sharmila Amin, India Head (Panprojects and Oil and Gas Business), Panalpina World Transport (I)

ized warehousing facilities and streamlining paper-work challenges for inter-state movements would be some new challenges that will come with the transition.

The road to GST is tough, but industry stakeholders seem confident about the government’s approach to GST implementation. According to Sharmila Amin, India Head (Panprojects and Oil & Gas Business), Panalpina World Transport (I), “The coalition government is dealing with the whole GST issue rationally, the steps taken to alleviate any misconceptions and feedback from all affected parties is being taken into account via the GST Council.”

DuRinG fEDExTHE WAs VARiOus THE fiRsT REiGns TO EQuiP Of THE DEliVERy PHARAOHs, VAnsTAx WiTH COllECTORs TECHnOlOGy WERE TO TRACK KnOWnPACKAGEs As sCRiBEs. 16

INDIA |

April 2011 | www.logisticsweek.com

< upshot

Big Deals All Around T

he Supply Chain Leadership Council (SCLC) organized the third edition of its summit on ‘PE, M&A in Transport Infrastructure and Logistics’ on March 10, at the Orchid Ecotel, Mumbai. The summit held a vigorous discussion on the future of private equity investments in the logistics sector and the numerous Vinod Giri, Director, IDFC PE; Sachin Bhanushali, President, GRFL; and Manish Saigal, ED, KPMG. mergers and acquisitions taking place in this sector.

The conference was attended by over 100 private equity investors, logistics companies’ promoters and CEOs along with a sizable number Date: March 10, 2011 of investment bankers and dealmakers.

Event: PE, M&A in Transport According to noted industry sources, India Infrastructure and Logistics will be a $5 trillion economy by 2022-25. KeepOrganizer: Supply Chain ing this figure in mind, it has been estimated Leadership Council that transport and logistics will constitute an Venue: Orchid Ecotel impressive 12-13 percent of India’s GDP in a

little over a decade. According to Mr. Manish Saigal, Executive Director, KPMG, “It is then not surprising that there have been over 160 deals in the sector in the last five years alone, roughly split half and half between PE and strategic transactions, making it one of the most active M&A sectors in India today.”

Vinod Giri, Director, IDFC PE, noted that “transport infrastructure investments, especially roads and minor ports, are doing better on current price basis as opposed to services investments.”

A M Sundar, CFO, Snowman Frozen Foods, opined that Indian companies would need to invest at least `20,000 crore to meet the demand for cold storage space.

However, Chetan Dikshit, Director, Rothschild, stated that it was his belief that freightforwarding companies received a premium as compared to logistics businesses globally. But he still expected large Japanese and Korean companies to come forward with significant M&A proposals.

Building New Links S

wiss logistics company, M+R Spedag Group, announced that it has completed the acquisition of PL Shipping & Logistics Pvt Ltd. The new entity will henceforth be known as M+R Logistics (India) Pvt. Ltd. Until now, M+R Spedag managed its operations in India through PL Shipping & Logistics.

Daniel Richner, Owner, M+R Spedag Group, said, "Mergers always pose a great challenge, as they involve all stakeholders. With us, there was already a strong degree of identification, resulting in a smooth integration."

He added, "What sets one apart is the portfolio of services you offer. Our niche customers buy a host of products from different countries. We arrange for the procurement and the supply chain."

Ramkumar Ramachandran, Managing Director and local partner of M+R Logistics (India) Pvt. Ltd. said, "M+R Spedag will focus on providing solutions for management of freight on at a global level. Moreover, with our extensive use of IT, our services will come at a premium."

18

INDIA | April

Daniel Richner, Owner, M+R Spedag and Ramkumar Ramachandra, MD, M+R Logistics (India), speaking at the event.

With over 35 branches and more than 1,000 employees in East Asia and the Indian Subcontinent, M+R Spedag Group is a major provider of transportation and logistics services.

M+R Spedag Group is a Swiss based international logistics company, founded in 1952. The company group has 72 branches in five continents, and an annual turnover of $500 million.

2011| www.logisticsweek.com

Date: March 29, 2011 Event: M+R Logistics (India) Organizer: M+R Logistics (India) Pvt. Ltd. Venue: Sahara Star, Mumbai

PAN India Warehousing (3PL/4PL) Reverse Logistics Primary & Secondary Transportation In-transit Damage Reduction Solutions Partnership in Road Safety Programs Logistics BPO Logistics Staffing Services Logistics Consultancy & Training Audits & Benchmarking

E-04, Devashree Garden, Rutu Park Service Road, Majiwada Naka, Thane (W) â&#x20AC;&#x201C; 400601. Maharashtra Contacts : (+91) 99879 22244/9820761645 E-mail: customercare@getl.in

< COlUmn

< Column

Measure For Measure Companies employ workforce based on the amount of work they perceive. But is the workforce gainfully utilized at all times? Calculating a time and motion study can help.

From Logistics To Supply Chain

A W

AT THE CSCMP Mumbai Roundtable in

PADmInIPagadala PAGADAlA Padmini General Manager, General Manager, TPGConsulting, Consulting, TPG Mumbai Mumbai

20

but that’s only because of the interesting

historyover of thethe Laboryears Standards end-February, Steve Mulaik of has The Progress The idea of logistics expanded to (Productivibecome in 1912, Fredrick Group, Atlanta, gave an insightful presen- ty Standards). the interesting, all-encompassing entity - Back supply chain - Taylor that tation on ways to improve labor productiv- decided to observe scores of American men it is today. Padmini Pagadala explores the two terms.

ity in large scale warehouse operations. Mr. Mulaik began his address by asking the auWhat’s in a name one may ask? We may dience if labor cost mattered in India. Bustshrug off the discussion, but not so the exing the myth that labor is cheap in India, perts in our industry. Recently, i was at a Mr. Mulaik illustrated how productivity is of cocktail party with some international veterutmost importance not just from an operaans from our industry, and they started talktional expense perspective but also demoning about what the right word was to refer to strated how slow associates could increase the industry we work in. they discussed the the number of Material Handling Equipment subject with so much vigor and argued back and hence the capital costs associated with and forth, that i thought it would be valularge scale operations by about 5 percent. able to recount their conversation. More than that, important because iEvolved think it shows Howit’s labor Standards how the field has evolved.

“If you can’t measure it, you can’t manage interesting for me a relative it,”What’s said Peter Drucker.

Theasf irst thingnewone comer to this field is that we haven’t always been needs to do in order to improve productivity called supply chain might professionals. according is to track it which seem obvious now to these “veterans,” our profession has really changed its name three times over in the last 50 years or so. it wasn’t until the beginning of the INDIA | April 2011 | www.logisticsweek.com new millennium that our recent name change to supply chain professionals took place.

loading railcars so as to come up with the standard times that it ought to take to get Why did the change take place? as we in a task done. He stated that there was ‘one india follow the supply chain evolution path best way’ to do things and was intent on that the West has mapped, it’s worthy to conf inding it and teaching it to the personnel sider each step and whether or not that step working in the facilities. This was the birth was really necessary or relevant. the biggest of time studies. mistake we can make is copying for the sake of Through a great deal of evangelizing, copying. it strikes me that sometimes even the other fi rms picked this concept up and began logistics terms used might not transfer as well making their own standards or ‘piece rates’. as the practices.

The times were tough and in the United States there were more people than there were jobs.

Theemployers Beginning The took advantage of the situaMost of be familiar with the Countion and you usedwould standards to their advantage. cil of supply Chain Management Professionals Most piece rates were skewed in favour of the (CsCMP). the CsCMP is thebest world’s pre-eminent employers, using the very person in a faorganization of supply chain professionals . cility to set the “standard” piece rate. there are thriving chapters of the organization in Mumbai and Delhi. But, what most readers may not be familiar with is that in the very beginning in 1963, when the founders came together to set it up, that’s not what they called it.

In the 1920s, Frank and Lillian Gilbreth took a different route towards improving labor productivity. Their focus was on the methods being used rather than speed. The Gilbreths studied the motions involved in a task and spent time researching the best methods to do a job. They called this process “Motion Study”.

They observed the hand motions of the workers and came up with better methods to do a job by eliminating non-value added steps or f iguring ways where both hands could stay busy at the same time.

Again, their emphasis was on methods rather than speed. Taylor, on the other hand, was concerned with speed.

It was these stalwarts – Taylor and the Gilbreths – who laid the foundation for modern day time and motion studies and hence labor standards. The next big innovation occurred in the 1940s, when researchers started developing what is known as Pre-determined Motion Time Standards (PMTS).

PMTS owes its origins to the US Government which outlawed the use of stopwatches for time studies. The concern was that the methods used to determine rates using Taylor’s methods ended up with “unfair” standards. Also, the ongoing War at the time meant that the US needed to use every person as effectively as they could. They needed to estimate how fast an “average” person would take to do a job and not the “best” person to help them plan war time production accurately.

The PMTS researchers observed thousands of people (American men in this case) performing various jobs. They broke down these jobs into very basic motions (e.g. grab something, walk 10 feet, etc) and came up with the time it required to perform these specific motions. They sampled individuals that was statistically deemed adequate and proposed that their average times represented the time it would take an average person to perform these motions. These predetermined motion times were used to evaluate the labor standards developed with stopwatches and in some instances to develop labor standards without the use of stopwatches. At long last, labor standards were finally being seen as “fair”.

Although there are a number of ways to arrive at a standard, labor standard is imperative to maintain an average performance of the employees. Getting back to improving productivity in your facility, you need to address the following questions individually: 1.

Are your associates working all the time?

2.

Are good methods being used?

3.

Are your associates working hard enough?

Utilization Of Time It is necessary to know if your associates are working all the time. As outrageous as this may seem on paper, this could mean several things on the floor.

The very first being a situation where associates constantly run out of work. In the case of running out of work, it is unavoidable that the associates pace themselves out so as to ‘keep working’ for the whole day.

There could be other avoidable delays such as conveyor failures, Material Handling Equipment failures, bad floors that prevent access to areas efficiently, system downtime, unfinished replenishment moves or various other things that may contribute to an associate unable to work for all of the stipulated time; of course, they could also be meandering, but this is less of an issue as the other delays.

Consequently, the first step in the productivity improvement journey is to ensure that the obstacles that hinder an employee’s inability to work for all of his/ her time are addressed. Once these are settled, the in-

Conducting a time study sounds easy but in reality it might not be so. The toughest part is rating the pace of the person who is being watched.

dustrial engineer can then take a stopwatch and do a time study to estimate the amount of time it takes to perform each of the sub-operations or “elements” associated with a job.

Conducting a time study sounds easy but in reality it might not be so. The toughest part is rating the pace of the person who is being watched. If you cannot rate the employee properly, that is, to an international expected pace rate, you are likely to end up with standards that may be grossly unfair to your associates or even you. There are international norms about how pace rating may be done but to be able to learn and apply these takes great skill.

Once the time studies are done, the standards ought to be explained to the workforce and to the supervisors.

It is then the responsibility of the supervisors to keep the workforce busy. I am aware of warehouses where the supervisors are assessed based on the both the efficiency of the workers in their areas and also the em-

INDIA |

April 2011 | www.logisticsweek.com

21

< COlUmn ployee utilization numbers in their respective areas.

Right methods Once it is ensured that the associates are assured of constant work, before setting the labor standards (that determine how fast the associates should be working), it is important to check if the job subject to labor standards is being performed in the best manner. This work can be significant. It could involve a separate project from that of setting labor standards.

To determine the best method, engineers go out on to the floor, study the processes and then mobilize better methods to perform the same operation. Sometimes these improvements can involve changing the software or equipment used. For example, if a certain operation involves having to key in the location of the pick each time, the engineer may fix the system such that a scan may replace the hand-keying of data.

More often, however, the changes uncovered by the engineer are simply “common sense” changes to how the operator proceeds through the work. For example, at one

Developing the labor standards for a warehousing operation can probably generate most payback than almost anything else you can do in warehousing. site we taught packing operators to grab and stuff two shirts at a time into a bag instead of one shirt at a time.

Once the best methods have been derived, they need to be taught to the associates. Once these methods are well practiced, time studies need to be redone and the labor standard revisited to reflect the new process.

Payback Time It is only after you have tried your best in the above two areas, should you trudge onto the path of incentives or paying workers directly based on their performance.

Setting up an incentive scheme should be the last resort and needs to be done only after you have made sure that all the obstacles to productivity have been removed, your supervisors have been trained to keep personnel busy all the time and the best methods implemented.

Many people jump into incentive programs too early without considering the implications. The reasons why

22

INDIA |

April 2011 | www.logisticsweek.com

you should consider incentives as the last option is because a) you don’t want to pay workers more because they have figured out a better method that you could have taught everyone. They should only make more if they work harder than the rest, and b) getting into incentives can drain the management and stress the employees. It may also give rise to questions that have never been dealt with such as a situation when an employee who may regularly perform over the incentive mark in one area but way below the acceptable level in another area of the operations needs to be paid. The employee may not want to work in areas where he can’t perform as well, but the business may require him to do so.

Several other key questions also need to be carefully thought out before setting up an incentive program. With incentives, one needs to decide where the incentive would need to kick in and how much of the incentive the operator would get. If an operator worked at 130 percent the rate of an average employee, would he/she get 130 percent of the average person’s pay or only 120 percent?

Incentives are but the last mile, though fruitful. According to Ralph Barnes, an industrial engineer, who has done massive amounts of work in this area, merely implementing incentives could increase the productivity of an operation by about 25 percent.

A labor standards project for a warehouse with about 15 different operations may take up to three to four months. But if the labor saved is about 25 percent, the payback would be in less than six months for an operation with more than 200 people. Developing the labor standards for a warehousing operation can probably generate most payback than almost anything else you can do in warehousing.

Back at the seminar, a question was posed from the audience about when the transition needed to occur from manual operations with labor standards to automated operations in order to improve productivity further. Mr. Mulaik answered by saying that the first foray or big investment one needed to make before jumping into hardware automation such as conveyors, sorters, etc was into good software.

In Mr. Mulaik’s mind, software could have an even greater impact on operations and not cost as much as hardware does. Mr. Mulaik said firms should consider buying a good Labor Management System or warehouse management system first, because these applications could often times provide a significant and more cost effective lift in productivity as an interim step before automation. That’s a very interesting thought to take back to your operations.

The author can be reached at padminimp@theprogressgroup.com.

91 11 26783281

91 11 26781481 82

110 037

< Cover Story

Photos: Vikram Barwal

24

INDIA |

April 2011 | www.logisticsweek.com

THE CHaIN IS THE LINK running a complex supply-chain, not to mention managing over 300 products (and counting) could deter even the most dauntless. However, for Atul Agarwal, Associate General Manager (SupplyChain), Dabur India, it is all in a day's work, reports Jayashree Mendes.

W

aTuL aGarWaL, associate General Manager (Supply-Chain), Dabur INDIa LTD.

ith overall revenue touching `3,000 crore in 2010-11, Dabur India Ltd is aiming for `4,000 crore in 2011-12 through organic and inorganic growth — an aspiration it tries to fulfill every year. Through acquisitions such as Hobi Kozmetik, Namaste Laboratories, among others, Dabur expects to offer a range of products to customers in each segment. So how intricate is the supply-chain of a company sending out 300-plus product groups and adding a few more each year through innovations or acquisitions?

The question is put to Atul Agarwal, Associate General Manager (Supply-Chain), Dabur India Ltd, who has been in this position 10 months after his predecessor took leave. He says, “Supplychain is about getting your fundamentals right and connecting all of them together correctly to make it robust. Hence, wherever required, we have tweaked our supply-chain for numerous products, based on strategy and markets.”

Understandably, the supply-chain at Dabur is multilayered because of the variety of products manufactured and sold. Different products have different supply-chain strategies and each product has its own exclusivity – manufacturing lead times, manufacturing processes, specific and rare raw materials, storing and stacking norms, not to forget the different licenses required for validations of formulations across most products, based on the Granthas [for herbal and Ayurvedic over-the-counter (OTC)] products and pharmacopeia (for Ayurvedic prescription medicines). To add to the enormity of work at the back end, the company has wide-ranging customers at the front end: general trade, modern trade, canteen stores, and institutional sale with each of them seeking specific requirements.

Mr. Agarwal attributes the end result of connecting the basics to only one thing: The products must be available on the shelves when customers demand them . He says matter-of-factly, “Our three divisions, the Consumer Care Division (CCD) have more than 100 products alone, the Consumer Health Division (CHD) and International Business Division (IHD) together have 500 products. So it is the suppleness of the supply-chain that is constantly put to test.”

What’s more, the introduction of new products – depending upon the segment it is intended for – calls for fine-tuning of the supply-chain. Mr. Agarwal says: “What could throw us out of gear INDIA |

April 2011 | www.logisticsweek.com 25

< Cover Story at times is adjusting the supply-chain for the new products. For instance, when we acquired Balsara in 2005, we didn’t have a supply-chain strategy for home-care products, as it is only with this acquisition that we entered the home-care segment.”

“The home care segment being significantly different from a typical foods business, called for a new approach towards designing a supplychain that is both unique and costefficient. The rethinking resulted in devising revised stocking norms at depot level, achieving efficiencies in transportation and careful product handling throughout its journey from factory to depot,” he adds.

This was a high point for Mr. Agarwal (then deputy general manager), who employed his skills at planning, forecasting, and inventory management, garnered from his 12-year experience with Ranbaxy as regional demand planner, prior to joining Dabur in end-2006.

As Dabur has become more global in expanse and nature over the years, the supply-chain has become lengthier and more complex, and Mr. Agarwal’s job is to ensure new supply-chains are connected and made operational

Dabur: SCM HIGHLIGHTS Market size: Market capitalization - `16,800 crore; Annual revenue – `3,000 crore Direct distributors: 3,300 total number of distributors: 3,600 Warehouses: 5 Warehouse Locations: Zirakpur (Punjab), Sahibabad, Bhiwandi, Kolkata, and Hyderabad SKUs: 1,000 Large LSPs: TNT Couriers, DARCL, Western Carriers, Inland road Transport Inventory turn ratio: 1.2 technology Providers: SAP, Accenture, Ariba retail outlets (owned and franchisee) : 550,000 Shelf-fulfillment rates: 90 percent retailers: 2.8 million

26

INDIA |

April 2011 | www.logisticsweek.com

as quickly as possible. For instance, Mr. Agarwal is currently engaged in, among myriad things, smoothening out the supply-chain at its operations in Nepal and Bangladesh.

Mr. Agarwal attributes his grounding in planning and allocation to his postgraduate degree in Operations Research from Delhi University, a specific stream of mathematics that comes in handy for supply-chain professionals, a stream of study that covers the Queuing Theory and the deployment of resources, whether for machine scheduling or deploying finished goods to the invoicing location using mathematical programming techniques, among others. A one-year diploma course from IMT Ghaziabad in Operations further polished the learning.

Beating the Deadline An FMCG with products ranging from health care to personal care to home care and foods to Ayurvedic products (See box: Products at a glance), the company also has to manage the supply of customized lots to its modern trade partners – such as Reliance Fresh, Bharti Wal-Mart, among others – to whom it supplies directly.

“For instance, Reliance Fresh may demand a particular product packed in sixes, while Bharti Wal-Mart may want it in fours. And we sell in eights.” Just-in-Time deliveries are sacrosanct for the company. Never mind that late consignments could stand the risk of penalties.

The FMCG company faces another challenge, namely of banding together the complimentary products (the freebies offered with the schemes), with the mother product.

The mom-and-pop stores prefer the freebies clubbed with the original product for sale. At times, when a shampoo is clubbed with a conditioner, a homegrown retailer may ask for a shampoo with a hair oil, and a specific one at that.

As consumer promotions are based

on choices in a region, for Dabur it means an increase in the complexity at the production front from a supplychain point of view. It also translates into increasing the number of stockkeeping units (SKUs), thus inflating the freight bill.

Mr. Agarwal does admit that the increasing demands from customers and promotions have made the supply-chain more challenging due to the addition of SKUs, products, not to mention the increasing costs of

Just-in-time deliveries are sacrosanct. Never mind that late consignments stand the risk of penalties.

materials, freight, rentals, managing inventory, etc.

The various acquisitions that the company has added to its kitty in the recent past have added to the learning. For instance, in 2009, when the company completed the acquisition of Fem Care Pharma Ltd, a product that Dabur sells as premium skincare, it discovered that its stockists were unwilling to pick up stocks as the value of the shipments were high. The company had to reduce the case size of FEM products keeping in mind the value per case. Moreover, Dabur had to create a parallel supply-chain for the same.

Sizing Up the Cities To differentiate between market demands, Dabur has separate distribution strategies for rural and urban markets. This enables the

< Cover Story company to push the various products across geographies based on user status and lifestyle. For instance, premium products are confined to urban and semi-urban areas, while keeping it at a trickle in rural. Simultaneously, it has stepped up its rural distribution reach in 71 high potential districts in eight key states through an aggressive marketing strategy.

Says Mr. Agarwal: “Our distribution strategy in rural India involves two layers—a stockist (or a super-stockist) and a sub-stockist.

Sub-stockists in small towns are spread out in remote locations, and our transport to these areas could be conventional, such as a two-or a three-wheeler. Orders are picked up from the sub-stockist and passed on to the stockist for supply.” Ayurvedic products, the prescription ones, are delivered directly to the sub-stockist. The stress is on prompt customer service and its 5,000 stockists across the country facilitate the process.

In urban markets, Dabur moves goods through a stockist or a superstockist or a distributor from where

MaNuFaCTurING LOCaTIONS India

International

Jammu

United Kingdom

Baddi, Himachal Pradesh (two plants)

Turkey

Sahibabad, Uttar Pradesh

Egypt

Pantnagar, Uttaranchal (two plants)

Nigeria

Jaipur, Rajasthan

United Arab Emirates

Birganj, Nepal

Nepal

Narendrapur, West Bengal

Bangladesh

Katni, Madhya Pradesh Silvassa

it moves to the destination store. Orders placed are accepted through the IT system (installed at both ends) such as electronic order. The stocks move out of the Carrying & Forwarding Agents (CFAs) to a particular stockist based on quantity ordered, frequency of orders and distance of the stockist from the CFA.

How the Wheels turn Dabur transports almost all its products in India by road. Using the services of a third party company, Ariba, Dabur conducts reverse auctions twice a year to select transporters. The company works with about 25 transport-

Stocks remain in transit at warehouses for a day and are moved out the next day to an invoicing location.

28

INDIA |

April 2011 | www.logisticsweek.com

ers across the country.

To understand the requirements for primary freight, the company carries out studies on a regular basis to ascertain the number of trucks and its rates for carrying goods from a unit to a mother warehouse or to an invoicing location, on a regular basis.

The number of transporters used is directly proportional to the amount of business garnered from that particular sector. Ariba sends out a request for quotations (RFQ) to transporters every six months.

Some prerequisites in the RFQ mentioned are: fleet range, number of trucks, the cost of the business garnered during the period, the transit time expected, areas covered across the country, etc. Participating transporters are cued in to the Dabur method of bidding in reverse auction through training by Ariba.

According to Nandan Narvekar, Director at Ariba India Pvt Ltd, “There are a few challenges here, both internal and external. Internal challenges are a lack of standardized and documented sourcing processes, and continuously reinventing to build win-win situations for company and its suppliers. Some external challenges we face are, coping with changing needs due to changing end-customer needs, and helping maintain a costeffective supply-chain with inflationary pressures.”

However, Mr. Agarwal says: “The reverse auction has helped us

< Cover Story to identify competitive transporters and bring down freight outlay considerably. This has been done by maintaining the competition among service providers and transparency of the entire process. The entire process of reverse auction takes three days vis-à-vis 20 days earlier.”

In secondary freight, which is from an invoicing location to a stockist, Dabur directly negotiates with the local transporters. Local companies are briefed on the weight and per kit that needs to be transported. For all this, a network analysis is carried out quarterly to optimize the distribution network while improving transit times, thus keeping costs low and improving service levels.

To better the method and make it efficacious, Dabur evaluates its vendors every month. Vendors are judged on three major parameters and given a report. The parameters are: transit time adherence, timely placement of trucks, and value of goods damaged during transit. The report is then discussed with the transporter and feedback taken from them.

And transporters are happy with the arrangement. Jitender Bansal, Manager (Fleet), Delhi, DARCL, says, “The hurdles in road transportation are many. But few companies look into offering feedback on the service provided and ask for feedback in return.”

The mechanized warehouses have an installation of a conveyor belt thus saving workers the inconvenience of mounting stairs when moving stocks.

Hub-And-Spoke With 18 manufacturing plants established globally, and eleven in India alone, Dabur manufactures various products across India based on demand, nearness to market, availability of material, fiscal benefits (See box:

GLObaL aCQuISITIONS In keeping with its aspirations to offer wideranging world-class products, Dabur has slowly, but steadily, eyed acquisitions or tie-ups with international companies. Last year it completed the acquisition of Turkish company Hobi Kozmetik, thus adding hair care and skincare products like Hobby and New Era. Recently, the company completed the acquisition of the US-based Namaste Laboratories dealing in skincare products.

Prior to that, it was Ra Pazarlama Ltd Sti,

30

INDIA |

an Istanbul-based wholesaler of cleaning products, and many others before that.

The acquisitions are well planned and reasoned out. While it expands the company’s scale of operations, it also gives access to technology that runs production and supply-chain. Dabur uses the technology to understand packaging, the processes and the ERP packages and replicate that strategy in India, simultaneously connecting the India offices with the global ones.

April 2011 | www.logisticsweek.com

Manufacturing Locations). For instance, Lal Dant Manjan (Red Tooth Powder) is produced at two locations: Baddi in Himachal Pradesh and Pithampur in Madhya Pradesh. Mr. Agarwal says: “If planning is suboptimal, inventories overlap. We had to find an optimum method to distribute the products evenly across the country. We thought of a hub-and-spoke model in 2009 and saw remarkable results.”

The company runs three hubs for distribution based in Kolkata, Hyderabad, and Bhiwandi in Mumbai.

Working out an effective supplychain not only improved service levels, but helped minimize loss of sales.

Hub-and-spoke also helped the company replenish faster and realize an increase in turnover. Beginning with the East, it was then extended to the South and then to the West.

transportation vendors are judged on three major parameters and given a report. the parameters are: transit time adherence, timely placement of trucks, and value of goods damaged during transit.

duced from 6 percent to 2.5 percent; forecast accuracy has improved from 35 percent to 45 percent; DIFOT (Delivered In-Full, On-Time) bettered from 85 percent to 90 percent; production adherence from 75 percent to 90 percent; and planning cycle reduced from four days to two days.

For stockists, Dabur has utilized Drishti, an in-house package connected via server to the company.

Drishti tracks the daily sales or goods received on a daily basis accrued from the invoicing location and entered real-time. It also generates “Suggested Orders” based on a replenishment model. Mr. Agarwal says confidently that about 80 percent of Dabur's distributors use Drishti.

A Business Intelligence (BI) tool helps in effective decision making,

PrODuCTS aT a GLaNCE

Behind the Scenes An efficient supply-chain management has three main objectives to fulfill: maintaining the right stocks at the right place and time; keeping low inventories; and achieving all this with the lowest operational costs. Dabur ensures a First-In-FirstOut (FIFO) policy for both raw materials and finished goods to ensure freshness of stocks.

Running the supply-chain are IT solutions like SAP APO, SAP ERP and homegrown tools for transaction, real time information, analysis and planning. The SAP APO (Advanced Planner and Optimizer) module was deployed not very long ago to optimize demand planning, production planning, and production scheduling.

SAP APO benefited the company in several ways: Sales loss has re-

HeALtHCAre Health Supplements n Chyawanprash (5 flavours) n Honey n Glucose (3 flavours) Oral Care n Dabur Lal Dant Manjan n Meswak n Promise n Babool Digestive n Hajmola (Tablets & Candy) PerSoNAL CAre Hair Care n Oil n Amla n Coconut Shampoo n Vatika (variants available) n Vatika Conditioner bleaches & Soaps n FEM Creme Bleach n Oxy Bleach n Saka Oxygen Bleach for men n Hair Removal Cream n Liquid Soap

Skin Care n Uveda Fairness Cream n Clarifying Face Wash n 2-in-1 moisturiser n Gulabari (Rose Water, face freshener, Moisturing cream and lotion) FooDS real Juice (14 flavors) n activ — Fruit juice (Apple, Orange) — Fruit Vegetable (3 variants) n Hommade Cooking Pastes (Ginger garlic, garlic, Coconut milk, Tomato puree, Tamarind paste) n Burrst (four flavours) n Capsico n Lemoneez n

HoMe CAre Dazzl floor cleaner n Odomos n Odonil (freshener - aerosol and tablets) n Odopic n Sani fresh n

INDIA |

AyUrveDIC otC n Gastro-intestinal—Pudin hara n Memory Enhancer— Shankha Pushpi n Cough and cold—Honitus Cough Syrup n Medicated oils—Badam Oil n Rejuvenation—Shilajit Gold n Baby care—Lal tail, Janma Ghunti, Gripe water n Women's health—Active Blood Purifier n Rubs and balms—Balm Strong etHICAL AyUrveDIC ProDUCtS n Stresscom n Broncorid n Madhuvaani n Trifgol n Lipistat n Rheumatil (Oil, Gel and Tablets) n Mensta

April 2011 | www.logisticsweek.com

31

< Cover Story

Food products have the lowest shelf life and thus a turnover of 14 days, FMCG products 21 days, and Ayurvedic products 35 days.

where the company gets its Management Information Systems (MIS) on a daily basis on various aspects like sales, stocks received, floor stock, goods in transit, etc.

In the year 2003, Dabur roped in Accenture to help identify opportunities keeping in mind the shortterm and long-term goals of the organization. The relationship is an ongoing one to date. Realizing that all the different arms would need different strategies, not to mention its just-planned retail, Accenture helped Dabur to achieve operational excellence, tangible and intangible.

According to a spokesperson at Accenture, "Dabur saw some tangible benefits such as improvement of depot availability, reduction in ‘lost sales at stockist’, improvement in

production plan adherence, reduction of forecast error, and improvement in fill rates." The intangible benefits were institutionalizing enhanced processes such as a rigorous Standard & Operating Procedure (S&OP) framework, implementation of enabling technology solutions, and organizational alignment.

Warehouse Management With five warehouses, of which only one is owned by the company, the rest are run by third-parties. Used expeditiously, stocks remain in transit for a day and are moved out the next day to an invoicing location.

Goods at the warehouses are shipped out batch-wise. This helps us with easy identification of its production, shipping, location, and sale – all managed with SAP. Coming from a pharmaceutical background, Mr. Agarwal introduced the system of maintaining the stocks at the warehouses in batches. He recalls: “Electronic bin cards built into the inventory system offer up-to-date information about the stocks at the warehouse, thus increasing efficiencies in warehouse operations. Bin cards help in locating a particular batch of a stock in the warehouse.”

The warehouse has also been

Inventory management is conducted at the production level, the CFA level and the warehouse level.

32

INDIA |

April 2011 | www.logisticsweek.com

divided into parts with specific allocation for various products. For instance, home care products and food products are kept far apart.

The supply-chain department keeps a sharp eye on ascending warehouse costs as near-prohibitory real estate/ rental prices would defeat the purpose of a lean supply-chain. Racks at the warehouses help in utilizing the warehouse space optimally and ensure stacking norms to minimize damages during storage.

According to Mr. Agarwal, “For some time, we have been mulling implementing RFID to improve warehouse efficiencies, though the idea is still costly in India at this point in time.”

For its CFAs, the supply-chain department undertakes a 360 degree performance evaluation through internal and external feedback mechanism, also enabled by an e-portal on a regular basis.

Inventory Management Inventory management is conducted at the production level, the CFA level and the warehouse level. The supply-chain for production planning is undertaken every week for a particular SKU. The deployment of SAP APO for the planning process helps its program.

The company ensures optimum inventory to ensure targeted service levels, taking care of variation in demand, keeping low working capital, and all the time maintaining freshness of stocks. For example, stocks of seasonal products or herbs are built before the start of the season based on past sales trends and current sale plans. This is to make sure that inventory build-up should be sufficient, while maintaining service levels during the peak season.

Inventory turnover is critical especially when the shelf life differs for three different products – Food, FMCG and Ayurvedic. Food products have the lowest shelf life

< Cover Story

Goods at the warehouses are shipped out batchwise. this helps us with easy identification of their production, shipping, location, and sale – all managed with SAP.

and thus a turnover of 14 days, FMCG products 21 days, and Ayurvedic 35 days.

The company’s manufacturing strategy is in keeping with its Vision III, a timely program (2010-2014) involving cognitive content. For one, it is dedicated to the health and wellbeing of every household, a line of argument inherent to Dabur's business philosophy and the reason it carries out extensive research for totting up so many herbal products.

Within the company, Vision calls for seeing numbers (in terms of sales) and methods to acquire the same. In terms of manufacturing, in Vision III, Dabur has decided to increase manufacturing by 25 percent and improve the supply-chain efficiency to keep pace with the increased throughput.

Accordingly, the manufacturing decisions (and the supply-chain support) are taken keeping in view the type of the product. For example, while Chyawanprash is manufactured at its own units, shampoo is produced in-house as well as outsourced to a third-party.

Just as it conducts reverse auctions for transporters, the FMCG has a process to identify capable third-party manufacturers. Dabur’s Research & Foundation based at Sahibabad along with its Central Quality team explore the capabilities of the vendor.

Consumers, especially semi-urban and rural, are keen to absorb high value products available in small packs. According to Mr. Agarwal, “Managing smaller packs which take away a lot of manufacturing capacity and increases distribution cost to move the stocks by that extra mile to be delivered to the bottom of the pyramid, was a challenge to the supply-chain team at Dabur.”

Supply-Chain risks Mr. Agarwal keeps a hawk's eye on supply-chain risks. Sometime ago, a manufacturing team at a unit in Nepal was showing signs of dissent.

Movement of goods had stopped

34

INDIA |

April 2011 | www.logisticsweek.com

for more than two months. During such a crisis period, Mr. Agarwal had to identify an alternative mode of transportation and worked with Concor to mitigate that risk.

An abrupt transporters strike also cannot be ruled out in the subcontinent. There are also potential risks associated with non-availability of critical raw materials either due to crop failure or some local disturbances at supplier facilities.

the Way Forward As Dabur grows both organically and inorganically in line with its Vision III, it becomes imperative for supply chain to evaluate its performance. Mr. Agarwal understands this aspect and is working on the following dimensions to ensure that the supply chain stays efficient and runs like a well-oiled machine: Process: Benchmarking against competitors is one way to assess where Dabur stands today. The company leverages in-house capabilities and experience along with inputs from external consultants to identify areas of performance improvement.

Technology: As complexities grow, it is near impossible for any organization to manage it without an adequate IT tool in place. Dabur is working closely with Accenture to deploy supply planning for all its businesses. The focus is to reap benefits by having optimized and constrained manufacturing plans that ultimately reduce costs and ensure better capacity utilization at factories.

Organization: As businesses adopt new models and ways of working, it is essential that supply-chain teams have the mindset to adapt to the new environment.

For Mr. Agarwal, the movement forward comprises adjustments in technology and acquisitions, while building up the supply-chain as the company continues to gain more products, through local and foreign buyouts.

WHO WANTS AN

iPad 2? + END - TO - END WAREHOUSING SOLUTIONS

Environment friendly solutions.

STORAGE | STACKING | FLOOR TRANSPORTATION | TOWING | TUGGING | LIFTING

COMPLETE CUSTOMER CARE

All-India Sales and Service Network, on time delivery of Products and Services and a unique CCC Program renders your business a truly unprecedented convenience in India.

BRINGING HOME THE GLOBAL EDGE

A partnership with Yale powers the manufacture of Internationally designed Forklift Trucks and Warehouse Equipment in India. Armes Maini, a JV with Armes Spa, Italy builds highly customized Warehouses and turnkey Automated Storage Systems of all capacities across the country.

ISO 9001:2008 (TUV Nord) Silver Sponsor

Gold Sponsor

Associate Sponsors

Edition - 2

Enabling strategic moves

The Warehouse handbook - ediTion 2

Maini Materials Movement Pvt. Ltd. brings you a wide range of High Quality Customized Materials Handling Equipments leveraging electric power for emission-free material movement applications.

The Warehouse handbook

Maini Materials Movement (P) Ltd., Survey No. 32, Chandapura, Hosur Road, Bengaluru - 560099 Phone : +91 80 43526555, Fax : +91 80 27832580, Email : sarath@maini.com

Published by

www.mainimaterials.com, www.yale-maini.in

2011

www.hamburg.co.in | +91 22 40155937

INDIA

SINGAPORE

Hamburg Media Private Limited Building No. 4/6, 1st floor, Sona Udyog Premises, Parsi Panchayat Road, Andheri East, Mumbai – 400069 Hamburg Media Private Limited Red Dot Building 28 Maxwell Road, #03-05 Singapore 069120

SUBSCRIBE TO LOG.INDIA AND WIN THE LATEST VERSION OF iPAD 2 Don’t miss the chance to win the latest version of the drool-worthy iPad. All you have to do is subscribe to Log.India for a minimum period of one year and you will stand a chance to win an iPad 2 through a lucky draw. Even better, if you subscribe for two years, and you are the lucky winner of the draw, we will pack in our latest and much-acclaimed 2011 edition of the Warehouse Handbook that covers hitherto unearthed concepts and practices from the Indian warehousing industry.

You can subscribe to Log.India online here: http://logisticsweek.com/shop/. You can also find all the subscription details and the process in this very Log.India issue on page 41. All the subscriptions received through any mode – online or offline – from the date of this issue stand eligible for the offer.

The deadline for the iPad2 draw is June 15, 2011. Please hurry up, you don’t want to miss the pleasure of having the logistics world at your fingertips!

For any assistance with subscription, please contact: Suhasini Savant Ph: 022-61162345 Email: suhasini@logisticsweek.com

< intErViEW

Gunning For Green For some time, DHL Express has been actively intimating its customers to take advantage of its GoGreen Program. While the company claims to have made inroads globally, Asia Pacific companies seem reserved and reluctant. Christopher Ong, Vice President - Business Development, First Choice and GoGreen for DHL Asia Pacific, Eastern Europe, Middle East and Africa (EMEA), explains to Log.India the benefits of the program.

For quite a while, DHL has been very active on the Green front – recently, DHL global forwarding joined the US green freight initiative, and DHL is feted often at several green supply-chain conferences globally. What is the idea behind the green drive? What explains its assertiveness?

It goes back to our global CEO, Frank Appel. He had stressed on the climate change issue very early, much Christopher Ong before most people in the industry. The foremost inV P - Business Development, tent is to minimize carbon footprint in supply-chains First Choice and which will have a huge positive impact on the global GoGreen for DHL climate situation. Furthermore, it increases our trust Asia Pacific, EMEA. among our customers in the sense that, when we give them their emission levels, they can trust it. By doing this with maintaining very high standards, we are setting industry benchmarks that other competitors would need to follow.

As more and more companies are turning towards corporate social responsibility (CSR) initiatives, we want to be at the forefront.

Can you tell us about the experience and legacy that DHL GOGREEN carbon neutral service brings to the recent DNVPS deal?

DNV Petroleum Services (DNVPS) is one of our recent customers for DHL Carbon neutral service. Our Carbon Neutral service, on its own, has been around since 2007.

Essentially, the Carbon Neutral service doesn’t require any special handling. The shipment follows a full normal shipment process. It is a standard shipment, but what is different, is that we calculate the customers’ carbon footprint by using our service.

It also helps neutralize the customers’ carbon footprint. There is no fundamental difference in how we handle a normal shipment and a GoGreen shipment.

It is just that we calculate it for the customer under the GoGreen initiative and neutralize it for them.

Can I have an example of how you calculate the footprint?

We capture the data at the ground, in over 2,000 logistics facilities, across 56 countries around the world. Every

36

INDIA |

April 2011 | www.logisticsweek.com

month, we collect this information, and store it in a centralized database. At the same time we also collect our aviation data, which is the emission from the aircrafts.

These two could be called as carbon inventory. We then have a tool that flips this carbon inventory level onto a shipment level.

When a particular package goes from Singapore to the US, it follows a particular route. We track the emission at every stage of the shipment and adding all this together, we can determine the carbon footprint of a particular package.

Where and how do GOGREEN’s services come into play while covering the outbound transport of DNVPS’ sampling equipment and the inbound transportation of bunker oil samples?

The arrangements have been set up and they are ready, apart from the service. Basically they rely on us to do the delivery and we in turn tell them the carbon footprint and the amount of emissions and the amount they can neutralize by using our service.

Which are the other sectors you offer these services to?

Who are your other customers in the past four years?

We don’t talk openly about our customers, although we have been getting a lot of interest from financial organizations such as Barclay Capital.

It’s quite interesting because the promise to measure carbon footprints is very good for branding. In the banking sector, everything is about relationships and branding. It is catching up because they can show others that they are good corporate citizens. Hence by being carbon neutral, we help them attract customers.

In the banking sector, could you name the areas where carbon footprint can be reduced?

The banking sector enjoys the service similar to DNVPS since it’s basically carbon neutralization.

Other than offering them a neutral solution, we internally try to achieve our targets with respect to carbon footprint by reducing emissions. We are also in the process of upgrading our f leet by adding new aircraft

and this means reduction in the level of carbon footprint because newer vehicles offer better fuel efficiency. We are also looking at alternative fuel vehicles. We are moving from diesel to CNG and trying out hybrid vehicles and electric vehicles. We aren’t just reducing our customers’ footprint but also helping them make the whole process efficient. This works well because the more efficient we are, the less we have to pay for the neutralization. As DP (Deutsche Post) DHL, we have committed to a 10 percent improvement in carbon emissions by 2012, and 30 to 40 percent by 2020.

This means for every kilo of shipment we carry, we want to reduce the amount of carbon emissions that we produce.

out of Asia. At a global level, these companies strive to be strong in their CSR and sustainability and the intent trickles down to countries in Asia where they are present. What we have yet to see is more indigenous Asian companies asking for carbon neutralization service. The requests have mainly come from developed markets like Taiwan, Korea, etc. but not so much from South East Asia, China or India.

But soon, with more legislations coming in place, companies cannot ignore it any more. Companies in Australia are seeking out more information because they are talking gaining carbon taxes. After the recent Cancun talks, more governments are moving towards bringing in legislations that stresses on emissions.

What are the regions where you offer these services?

The services are provided worldwide. Currently we offer it in 36 countries and progressively add countries. The 36 countries are the biggest countries in the world and represent a lion’s share of shipments and volume. We are also in the process of offering this to developing markets. For example in Asia Pacific, we offer this service in 17 countries and are looking at moving into emerging markets as well.

In terms of return on investment, have you been able to recover costs on this front?

Moving down the sustainability path has been financially beneficial for us. This is because, in the last two years, during the crisis, we went on a cost efficiency drive. Carbon efficiency equated to cost efficiency too. If we spend less money on petrol, fuel or electricity for every kilo that we move, we are becoming carbon efficient and also cost efficient.

At our end, it has required plenty of engagements to see a behavioral change. For example, we had to understand ways of using mechanical handling systems while utilizing it fully and ensuring it is turned off when not in use. Drivers are trained to be more fuel efficient. We look at optimization. As part of our efficiency drive, we also optimize our routes. Our operational changes increase our efficiency.

Of course, we are investing. We converted some of our diesel engines to CNG.

Does this include India?

When we signed up with Barclays, it was an Asia Pacif ic deal. Any shipment in and out of India enjoys this service. About a year ago we organized a media round-table in India explicating the GoGreen topic, where DHL Express’s John Pearson talked about measuring carbon footprint in India.

Right now we are refreshing our market knowledge of the service. India has been one of our best performing countries in terms of year-on-year improvement in turnover. Having said that, on a global scale India is not one of the most eff icient countries when it comes to carbon emissions.

In smaller countries like Hong Kong and Singapore, the traffic is extremely dense. The carbon footprint can be reduced as it is possible to achieve very low emissions per kilo. But in countries with large geographies like India and China, it becomes more challenging because of the larger distances to travel.

What are the challenges you see, particularly in India and Asia Pacific? What is the mindset of the companies?

Generally speaking, most of the customers we are engaged with are multinational companies that are based

How does that translate into benefits for clients?

Obviously, we are more cost-effective and efficient for the client if we have lesser carbon footprint. This would effectively reduce the amount the customer would pay to neutralize their carbon emissions over time. This is our goal.

Are you actively marketing this service to Indian companies?

We have a process in India. But few companies have expressed interest. This trend is common to not only India but other indigenous Asian companies. We are reviewing the aspect of GoGreen in India and hopefully you will see a lot more on the front very soon.

INDIA |

April 2011 | www.logisticsweek.com

37

< feature

Making Waves the advancements made by India in the telecom industry have placed it on a high growth trajectory. the breakneck speed of operations and processes have put people employed in this sector on their toes, in terms of bringing in change or adapting to changes being thrust upon them.

Frewin Francis and Remya Philip report.

Rekha Jain, Associate Coordinator at the Centre for Telecom Policy Studies, IIM (Ahmedabad), and Jacob Puthenparambil, Publisher, LOG.India, start off the event with the lighting of the lamp.

A

s of February 2011, statistics show India as the fastest growing wireless market with 752 million subscribers. This is a steep rise from 2001 when the subscriber base was a mere five million. By 2013, it is expected to hit 1.2 billion.

Adding more value to India’s telecom story is the implementation of 3G and number portability.

It is therefore only mandatory that this dynamic scenario receive grave attention, since such an ever-chang-

38

INDIA |

April 2011 | www.logisticsweek.com

ing industry is bound to meet numerous challenges. Analyzing these challenges and understanding how to cope with them are essential for smooth and sustainable growth for this sector. This is precisely what the telecom event organized by LOG.India on March 10, 2011, focused on. The event ‘Telecom Logistics - Managing Change’ held at the Hyatt Regency, Mumbai, saw a gathering of some prominent heads from the Indian telecom sector.

In a first-of-its-kind event covering various topics, eminent persons presented, discussed and debated current issues facing India’s telecom supply-chain.

How fast Can they Go? The supply-chain of telecom equipment encompasses great diversity.

Anil Khanna, Head (Hub Operations), Drive India Enterprise Solutions Ltd (DIESL), asserting this point said, “Catering to about four to

fig. 1

How telecom equipment Moves

Source: DIESL

five different elements in one supplychain makes it highly fragmented and complex. The main reason for this is the high number of Stock Keeping Units (SKUs).â&#x20AC;?

However, the multilayered nature of the telecom supply-chain consisting of manufacturers, OEMs, etc. is not the only reason for its increasing complexity (See Fig 1). Amongst others lie the constant advancements in technological trends like migration from 3G to 4G and the regulatory issues facing the industry.

SKUs can be divided into three main categoriesâ&#x20AC;&#x201D;packaged retail products, network installation products and value products. The packaged retail products include wireless or wired-line phones, mobile handsets, modems, etc. Net-

fig. 2

Managing Customer acquisition forms Confirm the Inventory to Client

CAFs picked fm Distributors

Frequency of pick up weekly

Acknowledgem ent to Client

Verification of CAFs

All mandatory doc.s like proof of res./age, etc along with CAFs

As indicated/ mapped in the WMS

Move Cartons to Storage location

Move CAFs to Storage Facility

Fixed Qty of CAFs/ CTN

CAF as well as CTN bar code to be added

Upload Inventory in WMS

Inventorisation of CAFs

Creating a soft copy data base / Unique IMEI no.must

Sequencing in line with the soft copy with CAF bar code inventory

Packing of CAFs in standard CTNs

Source: DIESL INDIA |

April 2011 | www.logisticsweek.com 39

< feature

Catering to about four to five different elements in one supply-chain makes it highly fragmented and complex. The main reason for this is the high number of SKUs." — anil Khanna, Head (Hub Operations), DIESL

work installation products comprise communication antennae/dishes, network tower cables/ducts, etc., while the value products are mainly the SIM cards, starting kits, memory cards, etc. The supply-chain strategy followed for every kind of equipment is tailor-made and has to meet its own explicit parameters.

Apart from the movement of products through the supply chain, value-added services provided to the customers also come under the purview of the LSPs. These services are the creation of starter packs, which includes all activities such as packing, kitting, bundling, etc.

Another important function that forms a part of the logistics sector is the maintenance of consumer acquisition forms (CAF). This is an extensive process that involves picking up forms from distributors, verifying the details, moving the CAFs to the storage facilities, uploading the inventory, etc. (See Fig. 2).

Although much effort is being put in to enhance the customer’s experience, Rekha Jain, Associate Coordinator at the Centre for Telecom Policy Studies, IIM (Ahmedabad), said, “Logistics costs are about 8-10 percent of the cost of equipment. This might seem small, but what we need to focus on is value provisions.”

the Vendor-Client War Considering that the telecom supply-chain is made up of several tiers, each party is faced with a unique set of challenges. Vendors often find that clients’ lack of foresight in demand forecasting makes it impossible to execute demand at short notice. Another issue that often crops up is cost. Vendors have long-term contracts and make allowances for additional costs of freight for unplanned items; sub-vendors, on the other hand, make the vendors pay for premium freight when they expedite orders.

From L-R: Ajay Chopra, CEO, DIESL; Shashikant Garg, Sr. VP (Commercial), Idea Cellular; Lalit Das, GM (Lead Logistics Solutions) India, Kuehne+Nagel and Soumyadipta Datta, Manager, Mobility (HQ-Contract and Commercial), Tata Teleservices, explain the pain points in terms of people and locations that the telecom industry faces.

40

INDIA |

April 2011 | www.logisticsweek.com

P Cal T PaTN abg al Po a TuT toraPerformance Excellence’, a ik iP go Ha PorT a Si Sa‘Roadmap k d i i v Mba orHandbook Tk Para on Indian Ports. u P T LOG.INDIA FOR M CHi PorTO SUBSCRIBE o k ldia Ha COST-EFFECTIVE SOLUTIONS FOR YOUR The handbook looks into all the issues related to the major Indian ports with experts’ views of a roadmap to possible solutions for ports infrastructure and performance excellence. The main topics to be covered will be:

SUPPLY-CHAIN AND LOGISTICS OPERATIONS. Ma y ww 200 9 w.l og-i n

Vo dia l. 2 - N .co o.8 m

INR

:10

Rs 100

INDIA

.1 ’S NO

LOGIS

Bulgaria

East Middle

INDIA

TICS

MAGA

INDIA

November 2010 — No.3 October 2010 | Vol.Vol. 4 – 4No.2

amit mukherjee, Vicepresident (iT and supply chain) and group cio at rpg, has deployed exemplary supplychain strategies at spencer‘s retail >> page 34

led by in team ply-cha up an putting erCity sup The Hyp y Nair (Retd) is Vija Lt Col. Page 34 show >> inspired

UP BACKING

32

PLY FUEL SUP d-

46

oil-an Exploring am and gas upstre supplymidstream chain biz

NEglEcTEd MARITIME‘S 44 waTErways ALBATROSS 38

Movement of telecom CSCMP’s 2010 conference network equipment opens at San Diego was bigger aand window of opportunity richer than ever

Why Four WMS leversstill thatdoes not canhave help enough improve takers in India transport efficiency

India ignoring inland Policyisand infra issues waterways at itsIndia’s own that are hurting peril maritime growth

TElE WHAT‘S com IN A log NAMisTic E 22s 20

Movem What isent theofright teleco netwo term?

Is it logisti m rk equip cs? Or ment asupply is itopens windochain? w of oppor tunity

HA

GCPL supp holds man ly-chain’s reple nishmen And the y takeaways for t model man Sinha, COO in the thick peer compani es. of the actio (Marketin Consum n is g & Ope er Prod rations), Rakesh ucts Ltd. Godrej (GCPL)

low BEST AMO NG ado EQU pTio ALS N 24 24

e

s s or rr

Order A ccu ra

5

NEg PLAYlEcT ING IT Ed waT SAFEErw 44 ays 44

cy

1

4

INDIA |

December

2

ion

o a ce n d ss M es ar gi ns

20 20

3

c Manage Ac Accur

nt ou

s

.... .... .... .... .... .... .... .... .... .... .... .... ... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ....

IND .... .... .... ... ....

U .... ....

WA STR .... .... ....

A cl TCH Y .... .... .... .... the ose lo 50 .... . .... af te autom ok at .... rmar otiv .... .... ket e .. in In dia.

RIG HT EX Don PEC unle ’t shakTATIO enou ss th e ha N 3 gh ere nds 8

TU R TIM NAR

OU Logi E ND prov stics 20 a ne ider softw w ag Four are enda Soft for has se 2009 t .

>>

< FEATURE

Why Why WMSbench still does marking not have mustenoug be made h a takers in in theIndia industry norm

r P s le Sa

Por t

low MORE FOR adopTioN LESS 34 24

• Need for Mechanization at Indian ports (which hinder entry of • Draft Constraints w Ha it n h d l e large vessels tocamost major ports) r e • The Policy Conundrum • Regulatory Issues (The24 TAMP Factor)

100 ``100

Mis ion Replensis h

ia OOK d n I f NDB so Page 22

Addit

e supply How reversmake or chain can ny’s t break a compa the marke position in

Prem K Verma, CEO, TML Distribution Company Limited, a Tata Motors subsidiary, discusses supply-chain in depth and offers innovative strategies >>

Assets

Few realize e plays maintenanc ’ orters in transp ns profit margi

amit muk herjee, Vicepresiden t (iT and and gro supply chain) up cio at rpg deploye , has d exempl ary chain stra tegies at supplyretail >> spence r‘s page 34

lue Va

M 26 VITAMIN the role

INDIA

Metho Motiond In

Outside The Box

TElEcom MEETING OF logisTics TITANS 16 20

NEW LAU N

MO CH 1 4 TO FR68 ROLA & FR 6000

Ing LOgIs

tIcs www.logist MagazIne icsweek.co m

Dece Octo ber mber 2010 2010 | Vol.Vol. 4 – 4No.2 — No.4

ZINE

Method In Motion

E YE S FRONT

IndIa’s Lead

100 `` 100

E

- No.10

Da m a Billi ng g

Vol. 3

ticsweek.c www.logis

om

Germany

July 2010

0/-

IndIa’s LeadIng LOgIstIcs MagazIne www.logisticsweek.com

30

34 • Labor Management at Ports 42 46 • PPP: Challenges and Opportunities • Major and Non-Major ports: Lessons to

Page 34

India An in-dep is ignorin th look g inland water securiways ty measu at own peril cases-in-poat itsres and int

ac y

2010 | www.logisticsweek.com

reas is a on good to do it.

ials

Mater .

Customized UTIONS Quality applications - END of High ING SOL movement a wide range END - TO WAREHOUS material ion-free brings you for emiss Pvt. Ltd.

ent power electric ials Movem leveraging Maini Mater Equipments Handling

be Learned on - ediTi

2

cts and of Produ in India. delivery on time convenience Network, unprecedented Service ess a truly Sales and All-India your busin renders Program

Period 1 yr

`1,080 (12 issues)

2 yrs

`2,040 (24 issues)

3 yrs

`2,880 (36 issues)

KING | STAC

R | FLOO

NG | TOWI

ING | TUGG

or

Silver Spons or

Gold Spons

rials Move

ed by

Publish

INDIA

Director India Logistics Week

h

n -2

201

ater

inim www.ma

Limited Media Private Hamburg 1st floor, No. 4/6, INDIA Building East, Private Limited Udyog Premises, Media Sona Road,1stAndheri floor, Hamburg No. 4/6, INDIA Parsi Panchayat Building – 400069 Premises, East, Mumbai Sona Udyog Road, Andheri Private Limited Parsi Panchayat Media – 400069 E Hamburg Mumbai Building SINGAPOR Red Dot Road, #03-05 Private Limited 28 Maxwell Media 069120 E Hamburg Building SINGAPOR Singapore Red Dot Road, #03-05 28 Maxwell 069120 Singapore

22 40155937 o.in | +91 www.hamburg.c

Francis Frewin Publisher and

Nord)

9 - 56009 Bengaluru r Road, ini.com a, Hosu sarath@ma Chandapur Email : y No. 32, 27832580, n Ltd., Surve : +91 80 -maini.i 555, Fax ment (P) , www.yale +91 80 43526 Phone : ials.com

Sponsors

Edi tio

Associate

Maini Mate

NG | LIFTI

Book your copy NOW and avail of the early bird discount Yes, I am interested in the specialEmail: offersuhasini@logisticsweek.com

by Log.India for  3 2years  3 years years  21years year

se rehou The Wa andbook1 :2008 (TUV

book

on!NDBOOK o S g in HandbookHA ComPorts Special Rate `1,300 STORAGE

TATION TRANSPOR

40155937 | +91 22

ISO 9001

e hand

oves

s.

tion ndly solu

ment frie

Environ

and Trucks E Forklift E G HOM designed highly customized BAL EDG ationally BRINGIN of Intern s Spa, Italy builds country.

THE GLO facture the Arme s the manu , a JV with ities across Yale power Armes Maini of all capac Systems rship with India.

Storage A partne Equipment in Automated Warehouse and turnkey Warehouses

40155937 | +91 22

rg.co.in

www.hambu

rehous

w

g

tegic m ling stra Warehouse Handbook-II Enab(2011) Special Rate `1,200

Yearly Cost

rg.co.in

www.hambu

The Wa

sin u o h are

Special Offer 1 year subscription `1,000 (12 issues)

E TE ER CARa unique CCC and CUSTOM Services

COMPLE

INDIA

9819928792

ticsweek.com

frewin@logis

our Book Y ow!

Copy N Private Limited

Media 400 069 floor, LimitedHamburg 1st (E), MumbaiPrivate No. 4/6, INDIA Road, Andheri Building .comPremises, DVV Media Panchayat www.logisticsweek No.4, Parsi Website: Sona Udyog Road, Andheri Building / 28240198 6-Sona Udyog, Parsi Panchayat Tel: +91-22-28375323 – 400069

East,

Mumbai

SINGAPORE

400 069

eek.com

www.logisticsw Ltd. (E), Mumbai3, Website: Inddia Pvt. Road, Andheri DVV Media Parsi Panchayat Fax: +91-22-2836014 Udyog,

Limited Media Private Hamburg Building Red Dot Road, #03-05 28 Maxwell 069120 Singapore

3 / 28240198 9, Sona Tel: +91-22-2837532

1 year

Fill in BLOCK LETTERS

INDIA INDIA

w w w.logisticsweek.com

Name:

INdIa

Designation:

Company Name:

Industry: www.logisticsweek.com

We Transport Information

Address: City: Country:

State:

Pin Code:

Telephone:

Fax:

Mobile:

Email:

DD / Chq. No.

Drawn on (Bank): for Rs.

Dated:

in favour of Hamburg Media Private Limited’.

Account Transfer: Remittance should be made to: 1. Beneficiary Account & Account No. Hamburg Media Private Limited’ 2. Swift No. : DEUTINBBXXX 3. I Ban No. : DE84500700100953478500 4. Information / proof of transfer with swift message copy should be mailed / faxed to Hamburg Media Private Limited’.

You can also subcribe for your copies online at: http//logisticsweek.com/shop/ DVV Media India Pvt. Ltd., 9, Ground Floor, Sona Udyog, ParsiMedia Panchayat Road, (Old Nagardas Road),Parsi Andheri (East), Hamburg Pvt. Ltd., Building No.4/6, Sona Udyog, Panchayat Road INDIA 0198 / 2837 5323 (OldFax Nagardas Road), Andheri (East),Email: Mumbaimail@dvvmedia.com - 400 069 INDIA Mumbai - 400 069 INDIA Ph:+91-22-2824 : +91-22-2836 0143 www.logisticsweek.com

Ph: 022-61162345 Email: suhasini@logisticsweek.com

NDIA

Subscription _A4 LOG.india_2009.indd 1

5/30/2009 11:27:32 AM

nce

< feature

Logistics costs are about 8-10 percent of the cost of equipment. This might seem small, but what we need to focus on is value provisions."

— rekha Jain, Associate Coordinator at the Centre for Telecom Policy Studies, IIM (Ahmedabad)

fig. 3:

Sliding Into Obsolescence

Source: Indus Towers 42

INDIA |

April 2011 | www.logisticsweek.com

Adding to woes is the stiff competition between the vendors as servicing a strategic market requires building up inventory, irrespective of the cost. But this entails a subsequent rise in logistics costs sometimes caused by a lack of communication between the government bodies required for certification or clearances. Yielding to this inevitability, vendors ship products only after orders are placed.

The clients’ story is as poignant.

They face shortcomings due to a dearth in supplier-vendor collaborations, evident in other industries like retail. Manufacturers are also known to provide broad targets of product lines without offering granulated data on specific components.

Getting the Center right A part of logistics that has been fraught with growing pains is the warehousing segment. Several elements to this large aspect of logistics remain largely untouched.

A crucial element of telecom logistics is the requirement of stateof-the-art placement and design of warehouses. Lalit Das, General

Manager (Lead Logistics Solutions), Kuehne+Nagel India, said, “Engineering studies need to go into building of hubs to ensure that a warehouse is strategically placed and designed.

As a warehouse is a temporary storage site, building smaller warehouses will put pressure on faster movement of inventory, and help reduce costs.”

Warehouses have come a long way to become what they are today. Many names and set-up changes later, they have grown from rooms with just four walls and a roof to technologyinclined warehouses spread over wide spaces and dedicated infrastructure. Ajay Chopra, CEO, DIESL, defined the role of warehouses by saying, “A warehouse is to the supply-chain what the heart is to the human body. How well a warehouse functions signifies the effectiveness of the supply-chain.”

A panel discussion examined other issues facing the warehousing sector. Sashikant Garg, Head (Logistics), Nokia Siemens Network (NSN), said, “Of the 8 to 10 percent that constitute the logistics costs, warehousing alone takes up 25 to 30 percent. This shows how significantly the warehousing costs need to be optimized.”

A crucial pain point facing telecom warehousing is the labor involved.

The complex nature of the telecom equipment makes it imperative to have experienced people handling the warehouses and its logistics. Mr. Garg explained, “If we are talking about kitting, the people performing this activity should have a fair knowledge of the material they are dealing with.”

Accentuating the need for efficient skillsets, Soumyadipta Datta, Manager, Mobility HQ – Contract and Commercial, Tata Teleservices Ltd. said, “We are extremely people dependent. So it’s not unusual that the departure of the one person handling the materials and processes at a warehouse could leave the others handicapped.”

There is also a dire lack of institutions producing logistics professionals in India. Logistics, especially of telecom equipment, is an area that requires certain specialized skills and technical training.

The business model is an area that needs to be worked on as well. It is important for the LSPs and others involved in the warehouse sphere to decide on a common business model that should be followed, and one that will help reduce costs drastically.

Mr. Das of Kuehne+Nagel India opined that warehousing needs to be studied from a strategic angle, to understand how operations can be smoothened out. A slack inventory management also leads to faster obsolescence.

Underlining on the collaboration between 3PLs, suppliers and service providers, Mr. Datta said, “This however requires extensive planning, and one that is highly inadequate. The planning should involve ways to gauge the inventory that is optimal and ways to reduce inventory holding time.” Safety at warehouses too needs to be ensured not just with respect to the material and equipment but the labor as well.

The panel discussion also touched upon the effect of implementation of goods and services tax (GST). Participants agreed that although GST would affect an elemental part of logistics costs, it would bring in some amount of consolidation. Mr. Datta added, “Logistics costs with regard to network equipment will see a consolidation, but I’m skeptical about any consolidation with regard to SIM cards and support equipment.”

The issue of road permits and bottlenecks faced in transporting of equipment to or from the warehouses is another major concern. This is a result of document related problems arising from a lack of concreteness from the regulatory bodies. Assuring that there’s still hope, Mr. Chopra said, “Although the regulatory bodies do need to work towards this area, there are several work groups striving to achieve seamless movement for the carriers, trucks, etc.”

Supply-chain managers must understand the current effects and future requirements which would enable the choice of right technology and solutions leading to better results."

— SK Balasubramaniam, Chief (SCM), Indus Towers

the Obsolescence Issue Periodic migration to newer technologies makes earlier technologies obsolete. SK Balasubramaniam,

From L-R: Rishiraj Bhagwat, Head, Commercial (Maharashtra and Goa), Unitech Wireless; Rekha Jain, Associate Coordinator at the Centre for Telecom Policy Studies, IIM (Ahmedabad); Aanand Pandey, Editor, Log.India; and SK Balasubramaniam, Chief (SCM), Indus Towers, discuss the logistics of customer acquisition concerning the revenue chain.

INDIA |

April 2011 | www.logisticsweek.com 43

< feature

A warehouse is to the supply-chain what the heart is to the human body. How well a warehouse functions signifies the effectiveness of the supply-chain."

— ajay Chopra, CEO, DIESL

Chief, Supply Chain Management, Indus Towers, def ined technology obsolescence as a measure of an asset’s loss in value resulting from a reduction in the utility of the asset relative to market expectations. It is inescapable and working on ways to deal with it should be the priority of manufacturers (See Fig. 3).

From a device industry perspective, Mr. Garg of NSN said, “Components become obsolete in eight months’ time. It then either goes into price drops or gets stuck in the channel and has to be given credit notes.

These are risks we face with obsolescence. As compared to FMCG who can retain over four to five months, in the telecom industry stocks have to be channelized in eight to ten days.”

Obsolescence is mainly of two types – External and Functional.

44

INDIA |

April 2011 | www.logisticsweek.com

External obsolescence occurs as a result of market conditions, customer demands and regulations, while functional obsolescence is due to structural, material or design issues. In India, it is mostly external obsolescence that affects telecom technology as most of them are tried and tested abroad.

Obsolescence is most impactful in the case of network infrastructure and supply-chain plays a critical role in managing it. Mr. Balasubramaniam stated, “Supply-chain managers must understand the current effects and future requirements which would enable the choice of right technology and solutions leading to better results.”

When technology peaks, the obsolete hardware could be efficiently collected and refurbished and later on deployed to the developing countries. Mr. Balasubramanium added, “The components of handsets can be consolidated to produce cheaper pieces at cheaper rates.

These can then be sent to developing countries where telecommunications is just burgeoning.”

Mr. Garg stated that changing technology makes product ramp-up capability of the supplier difficult.

It also results in tougher sourcing of certain components thus affecting the supply-chain. “For instance, it poses challenges in forecasting in terms of meeting customer requirements and provisioning space in the warehouse.”

Redesigning and reengineering the supply-chain is the way forward to keep obsolescence at a minimum.

Participants agreed that they need to move from a supply-push model to a demand-pull one and while doing so streamline the purchasing processes. It is important that supply-chain managers work on ways to reduce the time-to-market and automate it.

One of the challenges automation poses is to figure out a way by which the end-customer can be connected

with each of the parties providing the various services. For this, a system to break item codes of a device into multiple item codes is necessary, so that they can be sent back to the original suppliers.

Another way to counter obsolescence would be by sharing infrastructure. Telecom companies could share antennas, frequencies or even base stations. Outsourcing of backend activities could help reduce costs and keep obsolescence minimum.

Catering to Demand The revenue/customer acquisition side of telecom logistics is a subject rarely spoken about. It is that part of the supply-chain that caters to the end-consumer and is responsible for the addition of 20 million new subscribers every month. SIM cards, new subscribers and their needs, all come under this area.

This aspect, simply referred to as the demand side of the supply-chain, is quickly emerging. However, the lack of visibility in the system makes this appear a complex process.

Supply-chain managers have little information at their disposal about the retailers and their activities. Customer acquisition at the rural level is even less and there is little scope of identifying the retailers. Retailers too suffer due to the lack of visibility or access to the corporate offices.

Rishiraj Bhagwat, Head (Commercial), Maharashtra and Goa, Unitech Wireless Pvt. Ltd. stressed that this side of the supply-chain is one that deserves advanced and rigorous planning. He elaborated, “SIM cards take at least a monthand-a-half to reach India as they are manufactured abroad, after which it needs to move up the supplychain one stage after the other. The time lapse needs to be taken into consideration.”

Companies involved with the supply-chain management of SIM cards therefore need to be well aware

of the locations they are catering to in order to ensure timely deliveries.

With rural areas showing demand, care must be taken to ensure that these areas are not neglected. What is lacking is a system that depicts if the consumer demands are being met and how. Mr. Balasubramanium said, “How do we analyze consumption rates? If this is done with the help of forecasts, are supply-chain managers in a position to explore if the sales are really happening according to the forecasts?” Presently there are no methods to move nonmoving SIMs to places where they are in demand.

The reverse chain of getting money routed back as and when such a situation arises is one of the other constraints that exist with the reverse supply-chain. This is more of an issue in India since India is not an emoney country.

There is a need to analyze the costs of serving the customers.

In the present situation, often the cost of delivering the SIM cards is more than the cost of materials going into the kit. This is a pointer to optimize costs with dynamic decision planning models. Balasubra-

manium adds, “We should be able to gauge the number of SIM cards created, sold and other such aspects over a fixed time period, maybe on a monthly basis.” Measuring these aspects will serve as an effective solution to help optimize costs, quantity and responsiveness.

As for mobile number portability implemented recently, participants agreed that it would make little difference to individual operators. The three to four percent gain for the operators is only an initial boost, which will gradually decrease or equalize with time.

a few Solutions A consensus that most participants reached during the seminar was that much of the way the supply-chain functions today needs to be reconfigured to work in the current competitive and demanding environment. Companies need to bring in innovations in the supply-chain on a priority basis, not just in the area of technology, but also in terms of the business models.

Mr. Khanna feels that the reach of the supply-chain too needs to be improved by increasing deeper pen-

The audience listen as various speakers elaborate on the telecom logistics scenario.

etration in rural areas. The Tier II and Tier III cities across the country need to be catered to with high quality services at low costs. In order to make the supply-chain more agile, telecom companies need to collabo-

There's a need to analyze the costs of serving the customers. Often, the cost of delivering is more than the materials in a kit.

rate with one another in carrying out the logistics functions. Outsourcing many of the functions can bring about a stark difference in the costs and lead to an effective flow of the supply-chain.

The reverse supply-chain of telecom is equally complex and massive.

Supply-chain managers need to have a fool-proof plan in place to manage it successfully. All the relevant information needs to be synchronized so that customer responses can be made in the least possible time. There is also a need to develop appropriate performance measures so that improvements can be made depending on the existing state of things. A skill-set that takes into account both the demand and supply-chain is the need of the hour.

While the event was an enlightening one, it has hopefully succeeded in leaving the telecom logistics industry charged up with inspiration to take on the challenges posed by industry with vigor and sincerity. We will have to wait and watch how much actually gets done.

INDIA |

April 2011 | www.logisticsweek.com 45

< feature

Selecting Your

Warehouseâ&#x20AC;&#x2122;s Location

With costs exploding in the market, the location of a warehouse is crucial for an organizationâ&#x20AC;&#x2122;s profitability. With the sophisticated tools available today, a distribution network can be optimized, says Nithin Rajagopal

46

INDIA |

April 2011 | www.logisticsweek.com

I

n a well-designed supply-chain network location is of supreme importance. Selection of location impacts not only supply chain efficiency, but also have a significant impact on future cash flows.

So how organizations can make warehouse selection decisions, given a set of locations to choose from?

Even though this is fast becoming a typical distribution network design problem which consultants are hired to solve using mathematical models, the selection of the right locations to stock and/or to serve demand from is hugely atypical. The management taking such decisions needs to consider their company’s present and future business strategy and the practicability of proposed implementations.

Optimization enablers In a typical supply-chain network design exercise focused on distribution, organizations try to determine how many and which of these ‘potential’ warehouse sites they should use in order to meet the demand at specified service levels. Organizations are also concerned about the stability of such networks with varying demand fore-

cast numbers (high vs. medium vs. low growth), freight costs and other macro economic factors.

With the sophisticated tools available at our disposal today, a given distribution network can be optimized to determine the lowest cost (or most profitable) design, even while considering the impact of taxes and duties in addition to all the other supply chain costs, (manufacturing, handling, inbound and outbound freight and warehouse handling costs). Moreover, this can be done over multiple time periods and the network net present value (NPV) for one design can be compared with the other.

the Current Network Before one chooses a distribution network solution one should assess the current network or ‘Baseline’, as it is often termed. This assessment should be a part of the costs that are significant to a supply chain distribution network, with the Baseline network costs presented with the various cost break-ups. Typically, the costs that are taken into account are the manufacturing, warehouse facility costs (warehouse storage,

handling, processing) inbound, outbound and transportation costs.

Costs such as import/export duties and taxes can be included as well, if required, (for instance, international sourcing may make the network incur significant import duties which one might want to include in the network model).

Though not the first step in a network optimization exercise, the assessment of the ‘as-is’ network serves as the pivot against which all the optimized scenarios revolve and are compared against. The Baseline is a mathematical model of the ‘as-is’ distribution network and in addition to all the above, is the key in validating the data as well as the costs the business has incurred. This model is built as a representation of the organization’s supply chain network over the last N years/months/weeks as desired.

Defining Strategic Objectives Get the data required by the tool, give it a few locations you want to choose from, model these in, click the lowest cost or highest profit optimization button and there you go!

Supply Chain Network Optimization: Opportunity Assessment Segment

Category

# of Periods

Value (S)

Annualized (S)

Subtotal (S)

% of costs

% ‘In Play’ Amount ‘In play’ (S)

Raw Material Procurement

Main Recipe

12

45.0

45.0

80.0

46%

8%

6.4

Packaging

12

15.0

15.0 53.1

30%

90%

47.8

26.0

15%

100%

26.0

12.0

7%

100%

12.0

3.9

2%

2%

0.1

Source: Chainalytics Proprietary

Manufacturing Transportation

Distribution Inventory Carrying

Others

12

20.0

20.0

Fixed

10

10.5

12.6

Variable

12

40.5

40.5

Inbound

12

2.0

2.0

Interplant

12

5.5

5.5

Outbound

12

18.5

18.5

Regional Warehouses

12

9.5

9.5

Central Warehouses

12

2.5

2.5

RM

10

0.5

0.6

Packaging

12

0.8

0.8

FG

12

2.5

2.5

INDIA |

April 2011 | www.logisticsweek.com

47

< feature But despite the above complex solutions, the results for accurate predictions of network optimization may not be so simple. The reason is that the process of network optimization starts not just with tool selection or data gathering, but with a firm understanding of the strategic objectives of the exercise with respect to the business.

In order to get an understanding of how the exercise aims to improve the profit model, top executive level involvement is essential. For instance, people at the helm of affairs in an organization might see demand rocketing in the next few years and might be concerned if the current design and facilities (terms used interchangeably with the word ‘location’ in this article) are enough to meet the demand.

Data, Data, Data After defining the objectives of the exercise, which is an answer to the question ‘Why do we need to redesign the network?’ we need to get hold of supply chain network data.

This is where many arrive at the realization that not only is valuable data missing in their systems, but there is also a generous sprinkling of er-

rors. However, data gaps can be efficiently plugged by experienced professionals by interviewing people in charge of the overall supply chain network, distribution centers, and transportation and ERP systems.

Hence, analyzing and validating data is the next step and should not be confused with accuracy and completeness. Of all the data that is gathered, only a small portion might be statistically significant for remodeling the network. Pareto charts often come to the rescue here, indicating how major expenditures are incurred in a corporate.

Instead of using all the SKUs that the company offers, focus should be on SKUs that matter and/or are logistically significant.

As mentioned earlier, the ‘Baseline’ serves as the datum for validating various costs. Important questions such as the amount of money spent in manufacturing, the quantity of product moved from foreign sources, rental costs at warehouses, and the costs of outbound transportation need to be asked and answered to the satisfaction of all the stakeholders involved in the redesign effort. These numbers should match up (it may be a ballpark

Managing More With Less SC response line

Total cost

Inventory cost Cost

Facility cost

Transportation cost Number of Facilities Source: Supply Chain Management: A Logistics Perspective by South Western Educational Publishing (Feb 2008)

48

INDIA |

April 2011 | www.logisticsweek.com

figure) to the actual costs incurred by the supply chain.

Be realistic The opportunity assessment is primarily an analysis of the supply chain costs under various segments. Manufacturing, transportation, raw material procurement, distribution and inventory carrying costs are examples of such segments that are typically included in every analysis. However, these ‘costs in play’ need not be the costs available for optimization.

Creating a bulky, intricate model with detailed supply chain costs worked in may appear very exhaustive.

Such a model without considerations to size may, to begin with, take a long time to create and more importantly, take an even longer time to solve.

Optimizing the Network Depending on the nature of costs modeled and the supply chain network itself, a vast number of possibilities exist to optimize the model with various constraints. Usually, optimizing the network with the existing facilities itself yields a cost lower than the Baseline, and quite eponymously, this is called the ‘Baseline-optimized’ or ‘best use of current’ model.

Every organization’s network is unique and has to be dealt with uniquely in the model. Therefore, selecting warehouse locations from a given set is also subjective to the organization’s chain. However, a few examples for correct selection can be provided. n If you are sourcing internationally and some of your major markets are outside India, you might want to look at setting up a warehouse there, since that could drastically reduce or eliminate your freight spends. Another option would be to ship directly to domestic customers from the international warehouse. n Usually for products that are tiny in volume, weight and value, increasing the number of warehouse

locations might provide transportation savings, but again, increasing the number of locations beyond a specific number might increase the inventory costs enough to offset the trans-savings. n Choosing certain locations might help you improve your service levels, but could increase service costs. n Your model might favor one warehouse location over others purely for reasons of low space rental costs. However, should one have a warehouse with the capacity of a million square feet? n Often, the result of the optimization exercise might be very different from the current network, with only a few or possibly, none of the current warehouses being a part of the solution in the model. The optimal solution would be the one which uses additional warehouses to augment the current network, and not replace it. This might increase the solution cost, but also takes care of the investment already made. n As markets expand and demand grows, the network might change. This is primarily because distribution optimization exercises resemble the selection of weighted centroids (with demand being the weight) from which to serve the demand. In other words, the search is for a stable network that can cater to future demand projections as well.

The above figure is a representation of how various costs associated with the supply chain move as the number of facilities in the network increases. The key in distribution optimization is the tradeoff between inventory and transportation costs.

the India effect Being realistic and using judgment carefully are qualities much needed.

But perhaps nowhere is it more important than it is in India. What is discussed below is something all organizations must take into account

(and they do) while designing a distribution network.

Let’s start with the warehouses in India, called ‘godowns’.

Warehouses in India are more like covered structures with dirt floors, and are usually fairly small. The warehouse management system is usually a notebook in which warehouse personnel keep track of what comes in and what goes out. Things may be changing, but few warehouses in India can boast of the sophisticated automation and behemoth sizes of American and European warehouses (up to one million sq. ft).

Organizations are increasingly becoming aware of the benefits of developing their own warehouses, but regional network models with partnerships with 3PL companies, who already own warehouses or land, are easier and faster to implement.

One primary reason why warehouse automation and technology is usually neglected is the availability of inexpensive labor in India. However, with automation comes quality.

Warehouse management software can impose discipline and provide data for improving productivity. Another critical reason for the abysmal neglect of automation is high import duty on material handling equipment (fork-lifts, conveyor belts, etc.).

Cities are the biggest markets in India and most warehouses are located close to cities. Scheduling trucks becomes an issue, since most city municipalities prohibit movement during daytime. In such cases, docking outside the city and using smaller vehicles to run the last leg is an option.

Organizations might want to stage goods at multiple locations within a geographical area to negate some of the issues mentioned above.

Having smaller warehouses in each state (where they have markets, of course) might be better than having one big warehouse at one place to serve dealers/wholesalers/distributors across the country.

a Cost Saving Guide An optimized solution is not the last word, but more of a guide to achieving a stable and cost saving distribution network. Operational inefficiencies, demand-supply imbalances, freight issues, political turmoil, are realities that might change the transition path to implement the solution. The optimization tools are decision-support tools, not decision making ones.

Several questions need to be asked like (a) the availability of labor in proposed locations, (b) will tax in-

Choosing certain locations might help you improve your service levels, but could increase service costs. centives make one location more lucrative than the other, (c) the impact on service levels of a low cost network, (d) would the network change if sourcing locations change? If it’s so obvious, why isn’t the competitor doing the same? (e) is expensive technology worth it? (f ) how does the customer benefit from redesign?

A supply chain manager knows that his company’s business model, long term objectives, supplier and customer relationships and profitability of supply chain operations is affected by his decision, and he should know that this decision should not be left just to optimization models.

Nithin Rajagopal is Manager in the Strategy Practice of Chainalytics.

He can be contacted at nrajagopal@chainalytics.com.

(This is an abridged version of the article published in The Warehouse Handbook 2011, brought out by Hamburg Media.)

INDIA |

April 2011 | www.logisticsweek.com 49

< BOOK EXTRACT

Into The Even Deeper The petroleum industry has invested considerable effort in developing sophisticated mathematical programming models to help planners provide strategies and directions for refinery operations, crude oil evaluation and other tasks. But the models need to work in tandem.

I

PLANNING AND INTEGRATION OF REFINERY AND PETROCHEMICALOPERATIONS

By Khalid Y. Al-Qahtani and Ali Elkamel Copyright 2010 WILEY-VCH Verlag GmbH & Co. KGaA, Boschstr. 12, 69469 Weinheim, Germany ISBN: 978-3-527-32694-5 195 pages

50

INDIA |

April 2011 | www.logisticsweek.com

n most non-integrated situations, strategic planning is performed by one entity close to the marketing and supply functions, but nor part of them. Planning activities serve to consolidate feedstock purchases, commitments, and sales opportunities by attempting to set achievable targets for the plant. Scheduling is undertaken by another entity that stands between planning and operations. It attempts to produce a schedule that is feasible, if not optimal, to meet commitments. Process operations are handled by yet another entity, usually compartmentalized by processes, that operates the processes to the best capability, given the information available from planning and scheduling activities. The three entities have different objectives and possibly have different reward motivations and reward structures, which lead to different philosophies of what constitutes a job well done (Bodington, 1995).

The petroleum industry has invested considerable effort in developing sophisticated mathematical programming models to help planners provide strategies and directions for refinery operations, crude oil evaluation, and other related tasks. Likewise, there has been substantial development and implementation of tools for scheduling, as well as considerable efforts towards advanced process control for process plants to achieve optimal operations. Unfortunately, a gap will always exist between the three activities when working in isolation from each other. Typically, the refinery scheduler attempts to use the monthly linear programming (LP) model plan to develop a detailed day-to-day schedule based on scheduled crude and feedstock arrivals, product lifting, and process plant availabilities and constraints. The schedule usually includes details of the operation of each process unit, the transfer of intermediates to and from the tank farm, and product blending schedules. However, the scheduling is performed for

each tank instead of for a pool. Moreover, most refinery schedulers have few extensive computing tools to accomplish this task. Many use spreadsheets that contain individual operating modes for the primary processes and for the main feedstocks, based on the same data employs in the LP model. The scheduler utilizes the spreadsheet to generate manufacturing plans on a daily or weekly basis. Compounding the problem is the fact that deficiencies in planning or operations often create problems that appear in the scheduling process. Operating deficiencies or inferior data on the status of the production process could potentially lead to customer service problems. These problems may also occur due to either a planning activity with an overly optimistic estimate of available capacity or a poor understanding of the production capabilities.

Types of Planning Models Mathematical models can be classified in different ways depending on the type of analysis involved. For example, one can classify them according to their composing variables into linear and nonlinear models, or according to the nature of their variables and parameters into deterministic and stochastic models, or according to their component state into static and dynamic models.

However, from a process engineering perspective, we are interested in the inherent representation of the mathematical model of the actual physical system. Based on this, there are two general model classes: (i) mechanistic models, and (ii) empirical models. Mechanistic models are those based on a theoretical understanding of the system and the interactions between its process variables. They are often based on the application of conservation principles (i.e. material and energy balances) and equilibrium relationships. The main advantage of such fundamental models is the ability to construct them prior to putting the system into operation. Empirical models, on the other hand, also known as black box and data driven models, are useful when mechanistic models are difficult to implement due to complexity or resource limitation. In empirical models, the system is viewed in terms of its inputs, outputs, and the relation between them, without any knowledge of the internal mechanism of the system.

In the next sections, we will present a series of empirical model based case studies that illustrate different planning techniques commonly used in practice by many refineries.

Regression-based Planning: Example of the Fluid Catalytic Converter In large-scale plants, such as refinery processing plants, even a small increase in yield can lead to a

significant impact on profitability. This, and the increasing feed heaviness, as well as the more stringent demand in product qualities and environmental regulations (Anabtawi et al., 1996) make it necessary to develop models for refinery operations that can be used to optimize the various processes and also to predict product yields and properties.

The purpose of this case study is to illustrate how to develop such models. Since the FCC process is the most important and widely used process in a petroleum refinery, the present work is concerned with predicting yields and properties for this process. The consideration of other processes can be undertaken in a similar manner.

Fluid Catalytic Cracking Process The cracking reactions are carried out in a vertical reactor vessel in which vaporized oil rises and carries along with it, in intimate contact, small-fluidized catalyst particles.

In large-scale plants, such as refinery processing plants, even a small increase in yield can lead to a significant impact on profitability.

The reactions are very rapid, and only a few seconds of contact time are necessary for most applications. Simultaneously with the desired reactions, a carbonaceous material of low hydrogen-to-carbon (H/C) ratio, â&#x20AC;&#x153;cokeâ&#x20AC;? deposits on the catalyst and renders it inactive for all practical purposes. The spent catalyst and the converted oils are then separated, and the catalyst is passed downflow to a separate chamber, the regenerator, where the coke is combusted, rejuvenating the catalyst. The regenerated catalyst is then conveyed down-flow to the bottom of the reactor riser, where the cycle begins again.

A number of mechanistic modeling studies to explain the fluid catalytic cracking process and to predict the yields of valuable products of the FCC unit have been performed in the past. Weekman and Nace (1970) presented a reaction network model based on the assumption that the catalytic cracking kinetics are second order with respect to the feed concentration and on a three-lump scheme. The first lump corresponds to the entire charge stock above the gasoline boiling range, the second lump represents the gasoline range hydrocarbon products, and the third lump corresponds to the coke and C1 â&#x20AC;&#x201C; C4 products.

INDIA |

April 2011 | www.logisticsweek.com

51

< pAnoRAMA OFF THE SHELF

Processes In Motion

I

n their research based book, Dynamics in Logistics, based on the second International Conference on Dynamics in Logistics LDIC 2009, the authors describe the identification, analysis, and description of the dynamics of logistic processes and networks.

The book explains the spectrum reached from the planning and modeling of processes over innovative methods like autonomous control and knowledge management to the new technologies provided by RFID, mobile communications, and networking.

The book shows the challenges confronted by growing dynamics in logistics with completely new challenges and how it must become

possible to flexibly adapt logistic processes and networks to changing conditions.

The volume consists of one invited and 47 contributed papers divided into various subjects including mathematical modeling in transport and production, collaboration and supply chain control policies, adaption and cognition in logistics, and logistics solutions for ports, container terminals, and regions.

Dynamics in Logistics Kreowski, Hans-JĂśrg; Scholz-Reiter, Bernd; Thoben, Klaus-Dieter Publisher: Springer Price: `12,500

Healing The Pharma Supply-Chain

R

ees tries to bridge the gap between practitioners of SCM and the pharmaceutical industry experts. The book can be a pointer to both these groups to understand the different worlds they live in and how they can jointly contribute to provide improvements in supply-chains within the pharma sector.

The author stresses why scientific and technical staff must work closely with supplychain practitioners and other relevant parties to help secure responsive, cost-effective and risk mitigated supply chains to compete on a world stage. In the pharma supply-chain, this process should not wait until a drug has been registered, but should start as early as possible in the development process and before registration or clinical trials.

Rees suggests that CMC (chemistry manufacturing controls) drug development must reset the line of sight â&#x20AC;&#x201C; from supply of drug to the clinic and gaining a registration, to the building of a patient value stream. Capable processes and suppliers, streamlined logistics, flexible plant and equipment, shorter cycle times, and reduced waste. All these factors can and should be addressed at the CMC development stage. supply chain Management in the Drug Industry: Delivering patient Value for pharmaceuticals and Biologics

By Hedley Rees Publisher: Wiley Price: `4,650

Learnings In Logistics

P

atrik Jonsson explains the fundamentals of the subject to help students understand the game rules, goals and objectives when designing, planning and controlling efficient and effective logistics systems in supply-chains.

The author also speaks of the impact of information technology, the impact of manufacturing and product structures on logistics and supply chain systems, and the environment.

52

INDIA |

With the help of mini cases to illustrate current practice and discussion tasks that have been included in the book, the author aims to facilitate effective learning.

Logistics And supply chain Management

By Patrik Jonsson Publisher: Tata McGraw Hill Price: `4,095

April 2011 | www.logisticsweek.com

BLoGospHeRe natural Disasters Highlight need for supply chain Risk Management Blogger: Dan Goodwill Goodwill speaks of some of the recent natural disasters that have disrupted the global supply chain. We’ve had the earthquakes and tsunamis in New Zealand and Japan, and harsh winter storms throughout North America. Of course, disruptions to supply chains can come from factors other than weather or natural disasters. Quality control problems, piracy and export restrictions are just some of the factors that can come into play.

According to Patthira Siriwan, senior project manager for supply chain development in North America for Damco, supply chain risks can be categorized into five groups: operational, social, natural, economy and political/legal.

Each company needs to assess the potential risks to their company for each of the five elements outlined above.

Shippers should evaluate alternate modes and carriers to make sure they have options in place. In addition, each of these options should be tested under “real world” circumstances with actual freight to see if they are viable. search tags: disasters, risk, management, dan, goodwill

Dc-Lite strategies In today's stores?

Blogger: Arun Kumar Kumar is a blogger on the Infosys blog. In his latest blog entry, he considers a scenario where warehousing concepts are spilling beyond distribution centers in today's buy-online-pick-

By Steve New Steve New, a program director at the Center for Corporate Reputation, Saïd Business School, in his journal entry, “The Transparent Supply Chain”, writes on ever evolving functions of the supply chain.

Today consumers and companies are demanding details about the systems and sources that deliver the goods. Consider the trouble an opaque supply chain can cause.

Most iPhone owners probably don’t think about the origin of their devices, but worker suicides at Foxconn, one of Apple’s major Chinese suppliers, forced the company to pull the curtain back on part of its supply chain in 2009. It had to quell claims that it relied on sweatshop labor.

Until recently, customers had a limited view of supply chains. Even companies themselves have often been content not to ask questions about the origins and path-

cross Industry Knowledge transfer Blogger: Martin Buckley In his blog, Buckley discusses a general pain point of obsolescence in the high-tech electronics industry. Despite rapid advances in technology, it is becoming difficult to avoid the effects of product obsolescence and its effects on margins, scrap, and inventory levels.

Buckley’s experience gave rise to the question from another consultant, “Could any methodologies be applied to planning for obsolescence thus minimizing negative results?”

Both scenarios deal with supply that is degraded for use after a period of time. They also deal with material that must be scrapped and disposed of, and both can have severe impacts on inventory and the bottom line. search tags: cross industry, pharma, electronics, martin

Journals, Case Studies, Research Reports

ResouRce centeR The Transparent Supply Chain

anywhere-deliver-anywhere world.

With passing time, the fulfillment strategy for online orders has evolved to include a blend of regional DCs, central DCs and local stores. Hence it is pertinent to ask whether the underlying mechanisms of fulfillment have changed. Not much, it turns out. After all, once items are received and stocked in shelves, the store (just like a DC) must assimilate orders, pick items and perform deliveries. Assuming a very conservative 100 online orders per day, it must plan for the efficient picking of 4,000 lines. Picking activity must occur when footfalls are less so that the work schedules of store associates are optimized. search tags: DC strategies, Infosysblog, arun kumar

ways of the goods they source.

Driven by growing calls for transparency, firms such as Wal-Mart, Tesco, and Kroger are beginning to use new technologies to provide provenance data to the marketplace. Revealing origins will become an essential part of establishing trust and securing reputation.

The key technologies are not fundamentally new, but they are evolving to unleash new opportunities and identify threats. Product labeling has been transformed by microscopic electronic devices, genetic markers for agricultural products, and a new generation of bar codes that can be read with standard mobile phones.

What Every CFO Should Know About Inventory Optimization

In this white paper, Logility explains supply chain from the CFO perspective. CFOs strongly believe that a good supply chain performance is crucial to financial success.

Inventory strategy is crucial to good supply chain performance and availability of working capital. As the guardian of market value, no one is better positioned to transform supply chain management than the CFO. Given that CFOs play an important role in determining inventory optimization (IO) for the supply-chain, this paper throws up some facts that every CFO should know. It is important for CFOs to realize that ERP and Advanced Planning and Scheduling (APS) systems do not optimize inventory across the supply chain. Also, inventory optimization can move organizations to an entirely new trade-off curve between inventory cost and service level goals.

By Logility

Search Tags: logility, cfo, inventory, optimization

Search Tags: steve new, transparent

— Compiled by Frewin Francis INDIA |

April 2011 | www.logisticsweek.com 53

< pAnoRAMA LAuncHpAD

New Products, Technologies, Solutions

Solution

cargo transport solution – siemens

V

ectron is Siemens solution, designed to the transport roles and challenges prevailing in the freight market.

Vectron’s development was based on a large number of interviews with operators and on the experience of many Siemens’ Eurosprinters and Eurorunners in service. The decisive criteria for design of the Vectron were customer focus, economy of space, serviceability, transparency, safety, flexibility, and conversion capability.

Technologies in the Vectron include the pinion hollowshaft drive, known from the Siemens’ Eurorunner, which has been further developed for the electric Vectron locomotives for the high-performance class. With this drive, the whole speed range up to 200 km/h can be covered without bogie exchange.

Vectron electric locomotive bogies are designed with wheel brake disks and a standard pivot solution, which has proved its viability in the Siemens Eurosprinter ES64F4. Thus Vectron follows perfectly tailored solutions for layout and bogie for both the applications “electric locomotive” and “diesel locomotive”.

Siemens, with the Vectron has shown its commitment to the environment by the use of regenerative braking and utilization for secondary operations and train power supply, thereby increasing fuel efficiency and by using environmentally friendly materials

Key Features:  Pure traction in four possible variants: AC, DC, MS (multisystem) and DE (diesel-electric)  Modular country kits  Basic certified preferred variants with attractively short delivery times Manufacturer: Siemens Selling Point: Offers solutions for electric and diesel locomotive

Solution

Atc Recording solution

R

icochet is a Norwegian company that specializes in software-based digital recording and replaying systems.

The Ricochet solution supports all audio formats — including analogue, digital and VoIP — without a limitation on the number of channels. The solution supports numerous compression algorithms.

Also, the fully expandable, modular Air Traffic Control (ATC) recording and replay systems have the option to be easily expanded to cope with the growth of operations and controllers' tasks, making them the system of choice for over 250 airports.

Customers include Glasgow Airport, Orly Airport, Singapore Changi Airport and Abu Dhabi ACC and EACC. Recording and perfectly

54

INDIA |

April 2011 | www.logisticsweek.com

synchronized replay of multiple data-source types has been implemented as a core functionality of the Ricochet recording and replay system. When CCTV recording is used with audio and radar, Ricochet can synchronously replay a complete scenario.

Ricochet can interface with a GPS receiver mounted externally and continuously update the computer's internal clock. The Ricochet time service monitors the signals received from the GPS and the alarm manager can be configured to issue alarms related to signal quality and the number of satellites picked up by the receiver.

Key Features:  Supports audio formats -- analogue, digital and VoIP  GPS support  Invokes Windows' built-in Network Time Protocol (NTP) and act as an NTP server on the network Manufacturer: Ricochet Selling Point: Can cope with the growth in operations

New Products, Technologies, Solutions Product

scissorlift

T

he range of Bolzoni Auramo lift tables is one of the latest lifting solutions from Gandhi Automations.

During development, the company offered top priority to the safety of the operator using the lift tables. The tables comply with the European safety of machinery standards EN 292. All models in the range include aluminum safety bar and stop descent of the platform on contact with obstructions. Safety clearance is also provided between scissors to prevent trapping during operation. Safety check valves are present to stop the lift table from lowering itself in the unlikely event of the hose break and protection against overloading.

The Type 1-E Ergo-lift single scissor has been designed as a “work station” to provide improved ergonomic conditions to ensure the health, safety and comfort of the operator together with improved productivity. The hydraulic power pack inside the table has been provided with a relief valve that protects against overloading and compensates flow valve for controlled lowering speed. A wide range of accessories are also available to achieve even higher safety functions where conditions require.

Key Features:  Single acting hydraulic cylinders with drainage

 Max. 20 cycles per hour. One shift a day  Self lubricating bearings on pivot points Manufacturer: Gandhi Automations Pvt. Ltd. Selling Point: Safety check valves during operations.

Product

AccuVision

A

ccuVision from Accu-sort Systems is an industrial high-speed camera-based automatic bar code scanner. It finds application with one-dimensional and 2D bar codes, OCR as well video coding applications. The multi-side scanning feature enables labels to be placed on any side.

AV6010 camera bar code scanner is compatible with Accu-Sort’s FAST Monitor and VisionCapture systems.

FAST Monitor provides advanced ‘at-a-glance’ diagnostics. VisionCapture’s real-time image capturing enables quick resolution of poor quality or damaged bar code issues.

From the networking side, the system poses no single point of failure. It has a simplified cabling layout. A single RJ45 cable connects multiple devices. A mean repair time ranging between 10 to 15 minutes is another attractive feature.

The code scanner has reliability time greater than 75,000 hours at an operating temperature of 50 degrees Celcius, making it highly reliable and reducing total cost of ownership.

Key Features:  Read rate 99.9 percent for Grade A labels.  Reliability > 75,000 hours at 50°C Manufacturer: Accu-sort Systems Selling Point: Multi-side scanning feature INDIA |

April 2011 | www.logisticsweek.com 55

Scha

Non-compliant to new OHS regulations Inefficient warehouse planning Outdated storage systems Labour intensive operation Unable to meet KPI Lack of local support

Infinite Logistics Solutions

Poor use of available headroom Too many error in piece picking operations Non-compliant to FEM safety standards

Schaefer Provides You With The Logistics Success Formula.

Schaefer has the formula to add up all your logistics woes and convert them into successful solutions. Our Integrated Storage Solutions is the answer. It improves your warehouse operations with high-performance order picking, greater picking accuracy, faster movement of picked orders and many other customisable possibilities. Plus all these add up to cost savings for you.

Learn how Schaefer can help you at www.ssi-schaefer.in Schaefer Systems International Pvt. Ltd. Unit No. 504 â&#x20AC;&#x153;Powai Plazaâ&#x20AC;? Hiranandani Business Park, Powai, Mumbai : 400 076 Phone +91 / 22 / 6111 4700/710 Fax +91 / 22 / 6111 4777 eMail schaefer@ssi-schaefer.in

Schaefer_Formula 5_LOG_216x270mm.indd 1

12/8/2010 12:35:09 PM

< pAnoRAMA InteRfAce Interview

“Mindsets are changing”

universal freight Management (ufM) is a startup in the supply chain and logistics domain. promoted by shesh Kulkarni, president, ufM India pvt Ltd, he explains why he is gung-ho about air cargo.

Analysts say Indian air cargo is expected to be on a growth trajectory. How has the Indian market stepped up to this growth?

The Indian air cargo segment has shown positive signs in the last year going by the growth shown by import and export freight. This is a reflection on the trade and industry mood in the country. The shesh Kulkarni automotive, pharma, apparel, engineering and President, tourism are all showing positive signs of growth.

UFM India The internal trouble in various Arab countries cascades into escalating oil prices and is one the biggest worries we face.

The government has raised the bar for FDI in cargo airlines and foreign players are entering into strategic agreements with Indian LSP's.

How about the air cargo industry?

Air cargo companies, largely freight forwarding companies, have been the pioneers in bringing some of the global players to India.

Since 1991, several foreign global companies have set shop in India, of which many are 100 percent subsidies.

With regard to airlines, this market is governed by many factors of which FDI is a small aspect. During the financial meltdown and the

post ash-cloud episode, many carriers incurred huge losses and now, most of them are cautious.

Increasing capacity will impact yield (more space would mean pressure to fill the flights and might compel them to drop price) and less capacity would mean not growing fast enough.

What technologies are likely to gain a strong foothold in India considering the demographics, labor issues and the common attitude of replacing technology with man-power?

Technology is making headway in the logistics business and many Indian companies are adopting technology platforms provided by many global companies.

Serious players have web-enabled tools, track and trace, and seamless interface. Although technology is widely available, the only determining factor is the know-how on how to use it and the willingness to pay for it.

Mindsets are also changing. The younger generation understands the need for technology and its criticality.

What does the new budget spell for the air cargo industry?

The fact that the Government has made significant provisions for infrastructure is a good sign for the Indian logistics industry.

“The challenges lie in negotiating and overcoming the infrastructure bottlenecks” Robinsons Global Logistics is a new initiative started by 4th generation of Robinsons Group comprising young professionals. Headed by Rhea Vazirani, founder Managing Director, RGL strives to be a total solution provider in dry & cool logistics.

What are the challenges you face in the cold storage industry?

The cold storage industry may be male dominated, but that is of no consequence. The challenges were that as an entrepreneur.

Like most entrepreneurs, the challenges lie in overcoming the infrastructure botRhea Vazirani tlenecks. Getting vendors to set up the cold Founder MD, storage, ensuring uninterrupted power supRGL ply, preventing voltage fluctuations, getting vendors to deliver in time are some of the challenges I faced.

Could you provide some insights into your Stage 2 expansion?

We have maintained a similar format. The warehouses are leased. However our cooling equipment, which can maintain temperatures anywhere from - 25 degree Celsius to an ambient 18 degrees, is our own. While this equipment are expensive and require high maintenance, we can at least claim depreciation.

58

INDIA |

April 2011 | www.logisticsweek.com

What, in your opinion, would be game changers that the next budget will bring about?

The Union Budget 2011-12 has two significant developments for the cold storage industry. The first is the extension of the exemption of excise duty to air conditioning equipment and refrigerating panels for cold chain infrastructure. This is likely to prompt more cold storage units to come up.

The second game changer is the granting of infrastructure status. It means is that cold storage units will now be eligible for Viability Gap Funding (VGF). VGF provides financial support in the form of grants, one time or deferred, to infrastructure projects undertaken through public private partnerships to make them commercially viable. The government will now be able to encourage the private sector to set up cold storage units in close proximity with the farmers’ production areas. This in turn, will accelerate the growth of cold storage warehouses in urban areas.

What however, remains to be seen is how rapidly the government invites PPP models for cold chain and warehousing industries.

C

M

Y

CM

MY

CY

MY

K

The Benefits of Automation in the Distribution Centre

By Brad Welsman, Executive General Manager of the Automated Systems Division, Asia Pacific Region, SSI Schaefer

E

xperience has shown that automated storage and order picking systems can deliver substantial operating savings in the DC while at the same time improving the quality of order fulfilment.

What benefits exactly can be expected from automated systems within the Distribution Centre and how are such systems justified?

Reduced Dependency on Labour Availability An increasing problem in distribution today is finding enough people to carry out the often laborious task of picking and packing. Moreover, where labour resources are scarce, operations often have to contend with a high turnover of staff which in turn leads to soaring training and administration costs and undermines quality. Higher productivity automated systems reduce the number of operators required for storage, picking and packing and provide a much higher degree of ergonomics which helps retain staff and maintain quality.

Improved Space efficiency By making maximum use of headroom and minimising aisle widths, automated storage systems for pallets, tote bins and cartons reduce footprint requirements for stock storage and with it land and building costs. Additionally, automated Goods-to-Person picking systems do not have a traditional pick face but rather draw SKUs directly from an automated buffer system which is significantly more space efficient.

Summary of Major Benefits of Automated Storage and Order Picking Systems 1. Reduced labour costs 2. Reduced dependency on labour availability 3. Improved space efficiency 4. Improved ergonomics and safety 5. More resilient to changing order profiles 6. Extended facility Life 7. Higher quality fulfilment Reduced Labour Costs Automated storage and order picking systems reduce the need for labour and wheeled machinery in the DC. In automated Goods-to-Person order picking systems for example, the right goods are brought automatically to the person at the right time, walking is virtually eliminated and productivity when picking slower moving SKUs in particular can be ten times higher than with traditional zone picking or walk pick-to-pallet approaches.

High productivity ergonomic Goods-to-Person pick stations minimise twisting and bending

Automation Article_India_log India_revised.indd 1

Automated storage reduces space requirements and increases safety

Improved Ergonomics and Safety With an increasing focus on OH&S and an ageing workforce, operations are coming under more pressure to provide a safe and ergonomic environment for operators. Safety and ergonomics are becoming increasingly important drivers for automation. Automated storage systems reduce the need for forklift trucks and eliminate the need to have pallet movements interleaved with other tasks such as order picking.

Automated Goods to Person palletising stations provide for sliding rather than lifting of cases and eliminate walking.

Additionally, ergonomic pick from tote stations for small and split case items minimise bending and twisting, reducing injuries, complaints and lost time.

More resilient to changing order profiles A general trend towards more SKUs, combined with increasing pressure to reduce store stock and optimise store shelf space, has dictated the need for more frequent smaller deliveries.

In manual picking systems, more SKUs and smaller orders mean greater walking distances which reduce productivity. In contrast, automated Goods-to-Person pick stations are equally

2/24/2011 11:30:16 AM

Au

6 AM

productive for small orders as they are for large orders and the productivity is independent of the number of SKUs.

the comparison may be between building a new manual site versus building a new automated site.

An automated system will require significantly more initial investment than a manual system however potential associated savings in building and land costs need to be taken into account. Automated systems also require much higher maintenance costs including preventative maintenance, spare parts and breakdown support which together can run to 5 10% of the initial investment per annum.

Goods to Person pick station productivity is independent of the number of SKUs

Extended Facility Life Automated systems deliver increased productivity and therefore a higher capacity for meeting future throughput requirements. Automated storage allows for better use of existing space and automated picking systems do not have a pick face whose length increases with the number of SKUs. These things, combined with an increased resilience to changing order profiles, all contribute to extending the life of a facility. The opportunity to “sweat the existing assets” and delay a move to a new or different facility can often translate into significant savings.

Higher Quality Fulfilment In automated picking systems, there is a greater degree of flexibility with respect to how and when an order is assembled.

So for example the ability of Goods-to-Person picking systems to build pallets in accordance with differing store requirements with equal productivity can translate into significant savings. Moreover, automated Goods-to-Person picking systems typically allow for any order to be picked at any time, improving response times and increasing fulfilment consistency and quality, all of which leads to higher customer satisfaction and ultimately increased sales.

Is Automation right for your business? Can it be justified?

In general, the justification or business case for an automated system will be based on comparing the automated option to one or more alternatives.

The alternative may be to just continue as is, however, where an operation has outgrown its current facility, the comparison may be between moving now to a new manual site versus automating the existing site to prolong its life.

Where an operation has to move to a new site in any case,

Automation Article_India_log India_revised.indd 2

Where do the savings come from?

1. Reduced labour costs, including recruitment and training costs 2. Savings in land and building costs 3. Improved capacity to meet future demands 4. Fewer Lost Time Injuries 5. Higher staff retention 6. Improved customer service The higher productivity associated with automated system leads to lower labour costs and this is a key driver in determining the feasibility of the higher investment. The savings in labour costs are very much dependent on the labour rate and the throughput of the system. The case for automation is much stronger for operations that run 3 shifts in a high labour cost area. In considering a labour rate for the business case evaluation, all associated costs including overtime payments and management, recruitment and training costs should be included. These can be substantial for large manual sites, especially where there is a scarcity of labour and/or a high turnover of staff.

In most cases, automated systems require a much smaller footprint than manual systems. This may translate into direct cost savings from an immediate reduction in space usage or alternatively, it may allow a building expansion or a transfer to a new facility to be deferred. These savings should also be calculated and factored into the business case.

Finally, the business case for an automated system should consider not only the “hard” numbers such as labour and building cost savings but also the “second order” benefits of a safer, more ergonomic environment with improved delivery flexibility and response times. Although sometimes difficult to quantify, these benefits include less lost time through injury, increased staff retention rates and higher customer satisfaction which leads to increased sales.

For more information, please visit our website at www.ssi-schaefer.in or email us at schaefer@ssi-schaefer.in

2/24/2011 11:30:17 AM

< pAnoRAMA InteRfAce Interview

Applications Across The Board With its reputation for technical excellence and proven transportation & logistics practice, cognizant technology solutions builds world-class logistics solutions, be it in eRp, supply chain Management and eDI solutions. R Rajesh Balaji, Vice-president (Manufacturing and Logistics practice), cognizant, explains how.

What are the solutions you provide in the logistics domain?

Cognizant offers business-aligned technology solutions for organizations that want to leverage best practices in Transportation &Logistics (T&L). We help in a broad spectrum of areas, ranging from conceptualization to implementation and future enhancements of enterprise R Rajesh Balaji solutions, focused on helping our clients build Vice-President stronger businesses.

(Manufacturing and We also deliver solutions that integrate our Logistics Practice), consulting, infrastructure and business process Cognizant outsourcing services to identify the processes that are not core to the clients’ businesses and help our clients move those processes either offshore/ offsite or to a cloud-based Business Process-as-a-Service (BPaaS) platform. These services are offered on a managed services model or an SLA-based model, depending on client needs. We also offer testing services for changes in IT systems and architecture resulting from changes in business processes.

We constantly work in synergy with our partners, such as SAP, in developing solutions and then help implement them for other customers as well. We are also working with Oracle on product testing of the latest release of OTM for a specific client and creating use cases for it.

Our solutions are a combination of consulting, product fitment, process gaps and implementation for: n Human/vehicle management for railroad companies n Track signaling and management of assets n Fleet management and assets in a yard n Dynamic route planning and scheduling of assets for optimization and RoI n Performance management and analytics-based insights for logistics companies n Proof of Delivery (POD) for mobile pickup and delivery solution.

Our solutions have been implemented by large 3PL, dedicated cold storage companies and logistics companies.

62

INDIA |

April 2011 | www.logisticsweek.com

What makes solutions from Cognizant stand out from its competitors?

Cognizant’s solutions are developed to solve specific business problems with inputs from customers and leading academic institutes. These solutions are further enhanced by our partnerships with SAP. Our solutions are focused on providing innovation and come with a framework for maximizing RoI. Our solutions help railroad companies transport people and produce safely, quickly and in the cheapest manner. We ensure rail stocks are well maintained, signaling is accurate and trains run on time using data from signals and monitors to trigger applications.

In which sectors have your applications found most adoption? What have been the key client benefits?

Our solutions in the T&L space target both service providers (LSPs) and service-seekers (shippers), which includes manufacturers, distributors, warehouses, suppliers, life sciences, health care, pharma, FMCG, retail companies, etc.

Our solutions are focused on delivering the following benefits: n Global visibility of orders at all stages of fulfillment n Optimization of transportation costs n Improved asset utilization n Collaboration with business partners providing ability to react quickly to change in situations n Warehouse analytics to reduce cost n Reduction in expedited freight costs and non planned costs Who are some of your clients in India?

Cognizant has worked with life sciences, health care, industrial automation, oil & gas and FMCG companies in India, providing help in optimizing logistics costs, reducing transportation costs, improving warehouse utilization, inventory optimization across nodes, and visibility solutions, and providing solutions from “viewing to solving” using best of breed IT solutions.

Interviews, Company and Executive Profiles Interview

Offering Service With Quality Gandhi Automations has been at the forefront of automations and loading bay equipment in India. excerpts from an interview with samir Gandhi, executive Director, Gandhi Automations.

Could you explain the products and area of operations of your company?

Gandhi Automations is Indiaâ&#x20AC;&#x2122;s No.1 entrance automations and loading bay equipment company. We supply, install and maintain highly sophisticated industrial doors and loading bay equipment. The doors meet samir Gandhi various objectives like temperature control, Executive Director dust ingress, noise control, hygienic condiGandhi Automations tions, etc. While allowing for seamless traffic of forklifts, pallet trucks, etc. Our Dock Levelers also adhere to the most advanced concept of having the whole drive unit contained in a wall box which is installed on the wall inside the warehouse as against traditional ones which are installed under the platform. Our other points of strength are the prefabricated solutions for the quick construction of loading bays free of the frequent risks of fractures of the pavement, allowing reduction of construction time of pits by 60 percent and dramatically reducing the need of local man labor.

Our product range includes aircraft hangar doors, high speed flexible doors, sectional overhead doors, fire doors, PVC strip doors, flap doors, garage doors, revolving doors, sliding doors, swing doors, dock leveler, dock shelter, scissor lift, etc.

With a specially trained labor force, how and where do you manage the training?

Gandhi Automations has the most technically qualified personnel in the industry for installations and servicing our products.

We have a huge team of committed and diligent technicians; many of whom are trained at principal companies in Europe.

Besides, the products supplied by us are user-friendly and our customers are trained by our personnel in handling the equipment efficiently.

How do you handle the after-sales call for faulty products?

We strive to import products that are quality tested and certified to the highest available safety standards in the industry. Gandhi Automations has a dedicated team for after-sales service. We have a commitment to our clients to ensure that every complaint is attended to within six hours in all the major cities and 24 hours in small cities and rural areas anywhere in India.

How do face competition in the market?

In imported Dock Levelers and Industrial Doors segment, Gandhi

Automations commands more than 75 percent market share in India i.e. three out of every four Dock Levelers/Industrial doors have been sold and installed by us in the past five years. Over the years, our company has earned a reputation of offering world-class quality products along with best of after-sales support. This is our USP and Gandhi Automations has today become synonymous with quality and service excellence.

What does the future hold for the warehousing and MHE industry in India?

Globally, the use of material handling equipment (MHE) is common. There is an increase in multinational companies setting their base in India and these MNCs bring in their ways of moving

Inflatable Dock Shelter.

materials. Thus the industry is seeing a change in the way materials are moved.

The Indian warehouse and MHE industry is expected to grow steadily. The improvement in the Indian economy will result in accelerated demand for goods movement and create opportunities for suppliers of goods-handling products and services of all types.

Detail your future plans.

GAPL is continuously adding products to offer to customers -- a complete package in entrance automations, loading bay and warehouse equipment. The products offered by us are imported from companies that are global leaders in their respective fields. We have added aircraft hangar doors, tail-lifts, fire shutters and fire doors to our existing range of products.

INDIA |

April 2011 | www.logisticsweek.com 63

< EVENTS

A PUBLICATION OF HAmBUrg mEDIA grOUP

A p r i l 2 0 11 April 14 - 15, 2011 ChemproTeCh indiA Bombay exhibition Centre (BeC), mumbai ChemProTech India 2011 focuses on chemical process technology, equipments and supplies. The exhibition is organized by DMG World, Koelnmesse YA Tradefair and Chemical Weekly and is supported by the industry and other important associations. The exhibition provides a platform to all the exhibitors and visitors to create the business networking.

The exhibitors for the event include chemical plant equipment, process instrumentation, process control & automation engineering, project management & construction services, process licensors, environmental services, technology & products, consultants, consulting services, packaging equipment, quality & safety management, etc. organized by: Quartz Business Media Limited Tel: +44 1737 855000 April 19 - 21, 2011 pV + SolAr indiA expo Bombay exhibition Centre (BeC), mumbai PV + Solar India Expo 2011 will provide an opportunity to global players in photo-voltaic, solar thermal, solar architecture, equipment materials and systems.

The event will offer a common platform to all central and state governments, manufactures, solution providers, R&D and academic institutions.

Profile for exhibit includes conventional, nonconventional, renewable and clean and green energy, power transmission, distribution and conservation systems, process automation and instrumentation, boilers and steam systems, material handling systems, waste management systems, environment monitoring, petrochemical and electrical engineering, etc. organized by: Electronics Today Tel: +91 22 26730869/26730870 April 21 - 23, 2011 AuTomATion expo Chennai Trade & Convention Centre, Chennai Automation Expo will showcase all the latest products and services for industrial automation industry under a single roof.

The profile of exhibitors include machine tools & accessories, hydraulics & pneumatics, material handling, instrumentation & automation, industrial electrical & electronics, pollution control equipment, machinery for process industries, metallurgical plant & equipment, textile equipment, and fabrication machinery. organized by: Intel Trade Fairs & Expositions Tel: +91 22 28803977

66

INDIA |

April 21 - 23, 2011 indiA WArehouSing ShoW india exposition Centre & mart ltd, greater noida India Warehousing Show is a venture for the entire warehousing industry in India. In the light of the economic boom in the country, high quality storage solutions are in great demand. The tremendous rise in turnover of warehousing in India since 2007-08 is the driving reason behind this comprehensively dedicated three-day event.

The show will focus on three primary concerns of the industry which are storage space, efficient handling and timely delivery of goods. The event will also serve as a catalyst in the construction of new state-ofthe-art logistics parks in the country which are highly needed in today’s age of cut-throat competition.

Companies manufacturing or dealing in scissor lifts, continuous mechanical handling equipment, conveyors, conveyor belts, lifts, moving pavements, MHE, automated guided vehicles, industrial trucks, fork lift trucks, cranes, stackers & accessories, hoist able man platforms, cable cars, warehousing technology and facilities, warehouse management systems, automated storage and retrieval, systems, racking and shelving systems, pallets, bins and containers, are expected to be present at the event. organized by: Progressive Media Group Tel: +91 11 46520733 April 21 - 23, 2011 World reneWABle energy TeChnology CongreSS & expo hotel le meridien, new delhi World Renewable Energy Technology Congress & Expo has been organized by World Re-Energy Tech to promote the development of renewable energy within the country.

This show will comprise a congress and an exposition aimed at showcasing India’s growing potential in the field of renewable energy.

The renewable sector attracted investments worth $3.7 billion in 2008, which shows the massive scope in this industry. This year’s event is expected to bring in industry corporate leaders, technology providers and R&D scientists at the venue.

Exhibitors expected at the event are from areas like green power providers, solar, wind, bio fuels & bio mass, NGOs and non-profit organizations, policy makers and regulatory bodies, hydro, cogeneration and geothermal energy, renewable energy associations, insurance companies, architects, building owners, energy management and technology companies, and equipment suppliers and services companies. organized by: World Re-Energytech Tel: +91 11 24538318

April 2011 | www.logisticsweek.com

INDIA www.logisticsweek.com Hamburg media Private Limited

Bldg.4/6, Sona Udyog, Parsi Panchayat Road, Andheri (East), Mumbai -400069 INDIA Phone :+91-22-61162345 international office: Red Dot Building 28 Maxwell Road, #03-05 Singapore 069120

publisher: Jacob Joseph Puthenparambil jacob@logisticsweek.com publishing director: Jayaram Nair jayaram@logisticsweek.com ediToriAl editor: Aanand Pandey aanand@logisticsweek.com editor-Special projects: Pamela Cheema pamela@logisticsweek.com Features editor: Jayashree Mendes jayashree@logisticsweek.com Special Correspondent: Frewin Francis frewin@logisticsweek.com editorial executive: Remya Philip remya@logisticsweek.com CreATiVe Chief designer: Shivasankaran Pillai shiva@logisticsweek.com photography: Ramlath Kavil Ad-SAleS Ashok Chand Thakur ashok@logisticsweek.com Dinesh Mishra dinesh@logisticsweek.com eVenTS events manager: Upendra Kshirsagar upendra@logisticsweek.com marketing Support: Sangeeta D, Suhasini S HAMBURG MEDIA GROUP www.logisticsweek.com Printed by Jacob Joseph Puthenparambil, published by Jacob Joseph Puthenparambil on behalf of Hamburg Media Private Limited. Printed at Savai Printer Private Limited, A661, TTC Industrial Area, MIDC, Mahape, Navi Mumbai - 400 705, India and published at Bldg.4/6, Sona Udyog, Parshi Panchayat Rd., Andheri (E), Mumbai - 400069.

No part of this publication may be reproduced or transmitted in any form or by any means including photocopying or scanning without the prior permission of the publishers. Such written permission must also be obtained from the publisher before any part of the publication is stored in a retrieval system of any nature. No liabilities can be accepted for inaccuracies of any description, although the publishers would be pleased to receive amendments for possible inclusion in future editions.

Opinions reflected in the publication are those of the writers.

The publisher assumes no responsibilities for return of unsolicited material or material lost or damaged in transit.

All correspondence should be addressed to Hamburg Media Private Limited. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Mumbai only.

ANNUAL SUBSCRIPTION RATE INDIA: `1,080/INTERNATIONAL: EURO 240 / USD 325 SUBSCRIPTION TERMS The minimum subscription period is one year.

RNI No. MAHENG/2007/23777 l Registration No.MH/MR/South-279/2011-13 Allowed to post at Patrika Channel Sorting Office G.P.O. Mumbai - 400001 Date of mailing: 5th of every month issue

68