LOG.India July 2010 by Frewin Francis

www.logisticsweek.com

July 2010

Vol. 3 - No.10

Rs 100

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I N D I A ’ S N O .1 L O G I S T I C S M A G A Z I N E

EYES FRONT

The HyperCity supply-chain team led by Lt Col. Vijay Nair (Retd) is putting up an inspired show >> Page 34

VITAMIN M 26

BACKING UP 32

FUEL SUPPLY 46

Few realize the role maintenance plays in transporters’ profit margins

How reverse supply chain can make or break a company’s position in the market

Exploring oil-andgas upstream and midstream supplychain biz

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eDITORIAL

Human, After All

ot very long ago, I heard of a smart trick some small Mumbai traders use to test new vendors or suppliers – to see if these guys can be trusted for long-term partnerships. This is how it goes: while making cash payments (which usually is the case, given that these are small-time traders) to new vendors, these guys on several occasions would slip in one extra note into the bundle and see if the vendor points it out. For example, if a trader is paying a thousand bucks, he’d hand over eleven Rs 100 notes and ask the vendor to count the notes. If, on any occasion, the vendor quietly slips the notes into his pocket without pointing out the mistake, that’d be the last time he would be doing any business with this trader. It would mean the vendor is either careless with money or a cheat – and is a bad partner in either case. This is simple, yet effective. Since these traders are doing business in an unorganized Aanand Pandey environment, where there are limited ways of checking vendor credentials, they devise Editor innovative ways based on basic rules of human behavior. Even in the organized world, where we have tools and processes to make things reliable and smooth, it is such innovative ways, based on nuances of human behavior, that often save the day. This is the trump card up every great manager’s sleeve. Last month, we met Lieutenant Colonel Vijay Nair (Retd), who manages the supply chain of the Mumbaiheadquartered, fast-expanding HyperCITY India retail chain. Now when you step out to work in the morning to a place with ‘hyper’ in the name, you know you are in for a busy day. On a serious note, my understanding is that the ‘Hyper’ in the name refers to the ‘Hypermarket’ model, a concept that combines the you-name-it-you-find-it indulgence of a superstore with the homeliness of a department store – which is what the HyperCITY stores are about. Be that as it may, the task of managing the supply-chain of HyperCITY is not for the weak of heart. To give you an idea, the central DC in Vadape, Maharashtra, handles 1 lakh units every day. Overall, the supplychain team is handling 66,000 SKUs (Stock-Keeping Units) at any given point of time, servicing 800,000 sq ft of retail space. And the team comprises only about 130 employees (Col. Nair calls them ‘boys’, in true Army fashion). The best part is, this team clocks performance scores that can rival the best in the world. I kid you not. (In fact, the shelf fill rate is so good that the modest Colonel has forbidden us from bandying it about, lest it sounds self-congratulatory. You can find the number hidden somewhere in the cover story.) The other scores are as impressive. Now how does HyperCITY’s supply chain manage to put up such a splendid show? By and large it’s the planning, execution and the brilliant use of technology. But what provides the edge, I believe, are the innovative ways of managing human relationships across the supply chain. Let me quickly illustrate this point with a few examples. Maintaining a proper lead time for delivery of products is the biggest challenge for supply-chain managers all over the world, said a recent Aberdeen Group report. Col. Nair is not losing sleep over it anymore. This year he started an exercise in which he selects 15 vendors on the basis of business size and makes it a point to personally meet each one of them. “We are just trying to build a relationship with them,” he says. Another example is about how Col. Nair has significantly reduced counting errors at the DC. He trains his boys – most of whom have studied till high school – to jot the numbers on the pick-list in English, but encourages them to count in Marathi, their mother tongue. Result: Near-zero counting errors. Simple, yet effective, isn’t it? The third example is more illustrative of his understanding of bureaucratic behavior. HyperCITY must be one of the few retail companies to be paying octroi online. The result: Huge savings in costs and time, and better utilization rates. How was this accomplished? But you must read this and the rest of the incredible things the HyperCITY supply-chain team is doing in our fascinating cover story. Do give me your feedback on aanand@logisticsweek.com

Aanand Pandey

INDIA |

July 2010 | www.logisticsweek.com 5

Contents 22 IntervIew

26 GueSt Column Advantage M

Are you losing sleep over your trucks fetching poor margins? Is your transportation provider giving you the jeepers with increasing costs or frequent outages?

32 GueSt Column the Big Backstory

The reverse-logistics capability of a company can make or mar its brand image.

34 Cover Story Forward March

HyperCity India’s supply-chain team, led by Lieutenant Colonel Vijay Nair (Retd), works with a precision and a level of sophistication that would surprise many.

22 24 Column

3PL Commandments Have an urge to fire your warehousing 3PL? You could have saved yourself the trouble if you’d followed this checklist of things to do when choosing the 3PL.

34 44 GueSt Column

How About Middle Infrastructure?

24 6

INDIA |

July 2010 | www.logisticsweek.com

For the country to continue its growth trajectory the development of logistics infrastructure is required.

July 2010 46 FeAture

ADVeRtIseR InDeX

not for the Meek

Arham Logiparc ..................................................... 9

The logistics of oil and gas exploration and production (E&P) is both challenging and rewarding. Then why there are so few players in the field?

Auto SCM 2010 ................................................... 30 Barcode India .......................................................15 BLR Logistics ...................................................... 49 Capricorn Logistics ............................................. 43 CeMAT India ........................................................ 63 DHL Express....................................................... IFC Dighe Port ............................................................17 Drive India Enterprise Soultions.......................... IBC Emirates Skycargo .............................................. BC Energizing the Financial Supply Chain ................. 57 Everest Industries.................................................. 3 Exide Industrial.....................................................11 Godrej Security Solutions .................................... 29 Green Earth Translogistics .................................. 23 Hormann ............................................................. 31

Indelox Services ...................................................13 Institute of Supply Chain Management ................ 53 Round the Clock Logistics ................................... 59 Safexpress .......................................................... 37

56 BACK to BASICS

Uniworld Logisitcs ................................................19

In this section, we revisit some basic concepts – everyday logistics and supply-chain terms that need a brush up (or an update) every now and then.

Vijay Logistics ....................................................... 4

June 2010

Vol. 3 - No.09

Rs 100 Germany

www.logisticsw

June 2010

eek.com

VRL Logistics ...................................................... 21

Bulgaria

Middle East

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Port of Entrée Vijay Kalan tri, the CMD of BIPL and Port Ltd, Maha Dighi ’s first non-m the greenfi eld port rolling ajor port, sets >>

NOW, 7PL 22

The YCH Group about the legacyCEO talks the concept of with Dell, India strategy 7PL and the

reGulArS

58 PAnorAmA

news

Page 30

AT BAY 38

The $2-bn Indian seafood industry not enough meat has for big LSPs

BUILDING BRIDGES 46

The Yemen-D jibouti bridge can alter global logistics the map

events

JULY 2010

Books, Blogs and Journals A section that will capture books, blogs and journals that talk about the supply chain industry and logistics. INDIA |

July 2010 | www.logisticsweek.com 7

< news

TRAIN OF THOUGHT

I believe that organised retailing in India is poised to take off to the next orbit of growth... Over the next five years, I can realistically foresee this business growing ten-fold. — mukesh ambani chairman & managing director reliance industries, addressing the company’s AGM in Mumbai last month

There is convergence in the need for pursuing developmental activity and building quality roads. But the hurdles in acquisition of land and the social problems associated with it also need to be taken into account. — Kp rajendran Kerala minister of revenue at a seminar on ‘Proposed reduction of width of national highways in Kerala’

Any port in any state has to develop a rapport with the state government and convince the people of the state that the expansion and infrastructure projects would benefit people. — digambar Kamat, goa chief minister on the tussle between the state government and the Mormugao Port Trust (MPT) over the latter’s development projects

opeRaTIVe InDeX* Dubai World Central, Aban Air, ACI, Aerospace Consortium, Aviation Service Management, Coyne Airways, EuroAsian Services, Gatewick, Ramjet, Reem Style, Rial Aviation, Rus Aviation, Sonic Jet, SunGlobal, Skyline and United Aviation Services ......... 12 DHL, Apeejay, Eredene, J indals, Tatas, Visa Group ........ 14 CCCL, AAI, Sical, Nagarjuna, PSA Intl, Mitsui OSK, Casby, Geometra, VRL Logistics, Infolog ....................................16 Essar Shipping, .......................20 *Key entities mentioned in the news section

Hat-trick for Apple in AMR Supply Chain Top 25 cisco, wal-mart and proctor & gamble shine as ever, research in motion and microsoft blast their way in amr 2010 top 25 list

t the time iPhone 4 is breaking sales records around the world, Apple’s supply chain team is having a field day of its own. AMR Research, a leading research and advisory firm serving supply chain management (SCM) and IT professionals – now a part of Gartner Inc (since December 2009) – released its sixth annual supply chain report on June 2. And guess what, Apple has managed to retain its position at the first spot for the third consecutive year, owing to, according to the report, “stellar financials and strong votes.” The FMCG giant Proctor and Gamble, the only company to have figured in the top 5 for six

INDIA |

consecutive years, came in at the second position, followed by Cisco, Wal-Mart and Dell, in that order (see box). This time, five companies appeared in the Top 25 for the first time – the Blackberry maker Research in Motion (RIM), Amazon.com, McDonald’s, Microsoft, and Inditex, a Spanish Fashion retail chain with stores in 76 countries.

The AMR Supply Chain Top 5 for 2010 Apple Proctor & Gamble Cisco Systems Wal-Mart Stores Dell

July 2010 | www.logisticsweek.com

The FMCG behemoth, Unilever, stages a comeback into Top 25 at the 21st position, in good part owing to its successful access to fastgrowing markets such as India and Africa.

AMR has attributed Apple’s glowing performance on supply-chain metrics to the latter’s ability to transform its supply-chain into a value chain “starting with the consumer experience and design-

Ranking Parameters  return-on-asset [(2009 net income / 2009 total

assets)*50%] + [(2008 net income / 2008 total assets)*30%] + [(2007 net income / 2007 total assets)*20%]  inventory turns: 2009 cost of goods sold/2009 quarterly average inventory  revenue growth: [(change in revenue 2009-08)*50%] + [(change in revenue 2008-07)*30%] + [(change in revenue 2007-06)*20%]  composite score: (Peer Opinion 25%) + (AMR Opinion 25%) + (ROA 25%) + (Inventory Turns 15%) + (Revenue Growth10%) Source: AMR Research

< news the amr supply chain top 25 for 2010 Rank

Company

Peer Opinion 154 Voters (25%)

AMR Opinion 3-Year 27 Voters Weighted (25%) ROA (25%)

Inventory Turns (15%)

3-Year Weight- Composite ed Revenue Score Growth (10%)

Apple

2787

508

11.7%

60.7

21.7%

8.21

Proctor & Gamble

2416

567

4.9

3.5%

5.91

Cisco Systems

1678

501

11.4%

11.8

4.2%

5.43

Wal-Mart Stores

2567

365

8.2%

8.7

4.3%

5.18

Dell

2049

273

7.1%

47.4

-5.4%

5.06

Research in Motion

299

23.7%

13.7

62.4%

4.49

Amazon.com

1369

215

7.1%

11.9

30.4%

4.13

McDonald’s

506

13.7%

134.6

1.1%

3.97

Microsoft

363

151

21.1%

12.2

6.9%

3.92

Tesco

846

150

5.4%

19.7

9.2%

2.78

Unilever

630

168

11.5%

5.4

0.3%

2.76

Inditex

16.2%

4.2

9.4%

2.72

Best Buy

1105

7.7%

5.8

11.2%

2.64

Schlumberger

427

104

13.5%

8.8

2.63 Source: AMR Research

ing its network to serve that master (the consumer) first and foremost”. Cisco’s consistent performance on this list are owed to many areas of supply-chain innovation where Cisco is considered to be a first-mover – supply-chain risk management, multilevel demand-planning excellence and regionalized supply network architecture. The main credit, however, according to AMR, goes to the Cisco leadership’s “championing of the term ‘value chain’ as an organizational construct” under which the IT giant has brought together sourcing, production, logistics, customer service, quality, and new product launches as hard-line report functions. Wal-Mart this year climbed three spots to No. 4, as the report attributes its success to its cost-focused supply-chain innovations and the fact that the company’s reputation among supplychain peers “remains stellar”.

The report particular gives special mention to Wal-Mart’s work in India to improve the operations of thousands of upstream suppliers The report particular gives special mention to Wal-Mart’s work in India to improve the operations of thousands of upstream suppliers (read farmers) which, even in a small way, contributes to the betterment of the local economy. The software giant Microsoft was a newcomer to the list since the AMR analysis has excluded software companies traditionally – due to the lack of a physical supply chain – but Microsoft’s Xbox, peripherals and shrink-wrapped software business have be-

come so big that they couldn’t be ignored anymore. Another newcomer, Research in Motion – the Blackberry maker – ranked at No. 9 deserves special mention because it blazed its way into the list with inventory turns and return-on asset (ROA) numbers that challenged the best in the list (see box).

narrowing it down The Supply Chain Top 25 ranking comprised two main components: f inancial and opinion. The f inancial data available in the public domain provided a peek into how companies have performed in the past, while the opinion component offered an idea of future potential and ref lected future leadership, an important characteristic. These two components, having the equal weightings of 50/50 are combined into a total composite score.

The fi nancial component comprised three fi nancial metrics: ROA, which provided a general proxy for overall operational efficiency and productivity; inventory turns, that offered an indication of cost; and revenue growth i.e change in revenue from prior year, which, clearly reflecting myriad market and organizational factors, offered some clues to innovation. RoA was weighted 25 percent, inventory turns 15 percent and revenue growth 10 percent. The opinion component of the ranking, was made up of two components, each of which was equally weighted at 25 percent: an AMR/Gartner expert panel and a peer panel. The goal of the peer panel was to draw on the extensive knowledge of the professionals that, as customers and/or suppliers, interact and have direct experience with the companies being ranked.

indian cos have entered into m&as worth $40 billion in h1 2010, best since h1 2007 10

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July 2010 | www.logisticsweek.com

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< news

Stormy Skies? Dubai’s Al Maktoum International Airport is open for business, but a dark cloud hangs over the levels of customer demand for the new facility, explores Kathryn Semcow

“The biggest challenge is fees and regulations, Dubai increasingly integral role in the ubai World Central Al Maktoum International Airport the fact that we have one of Airports only mentioned the ongoing economic and social is officially open. The airport, the leading airports in the positive incentives it offered to development of Dubai,” he said. slated to be the world’s largest, world right next door in Dubai shift. “We have offered time- “It is a proud day for Dubai and welcomed its first flight land- International,” Anita Mehra, bound commercial incentives an auspicious occasion for the ing on June 20, as part of a se- Vice President, Marketing and related to parking, fuel and future of global aviation.” Communications handling charges to name a few Phase one of the airport will ries of operational tests. Emir- Corporate ates Flight EK9883, a Boeing for Dubai Airports, told LOG. to encourage our early adopters feature one A380 capable run777 freighter operating Hong “However, DWC has its own to start operations at the new way, 64 remote stands, one cargo terminal with annual Kong-Dubai and capacity for 250,000 piloted by Captain tonnes of cargo and Ahmad Bin Huzaim a passenger terminal and First Officer Nabuilding designed to acbil Yousuf Ahmad commodate five million Mohammad Rai passengers per year. Al Boom, touched “Although it is a down at 1650. long term project, A week later, on the need for a second June 27, charter and airport in the near to scheduled flights ofmid-term is clear,” ficially began, with added Paul Griffiths, inaugural flights CEO, Dubai Airports. from by Rus Avia“Dubai International tion, Skyline and currently has capacity Aerospace Consorfor 2.5 million tonnes tium. Dubai Airports of cargo while volumes publishing a list of carriers expected to Picture of the new Emirates tower, which is connected to the new Newcastle-Dubai are expected increase 48 per cent to 3 million come on board in the longhaul flight tonnes by 2015.” coming few weeks Only time will tell whether that included Aban Air, ACI, unique selling points that air- facility,” said Mehra. Aerospace Consortium, Aviation lines find attractive. The faciliAt the opening Sheikh Dubai World Central’s gamble Service Management, Coyne Air- ties are new, the operating en- Ahmed Bin Saeed Al Maktoum, that there is enough cargo and ways, EuroAsian Services, Gate- vironment is uncongested, it is President of Dubai Civil Avia- passenger demand to warrant wick, Ramjet, Reem Style, Rial located next to Dubai Logistics tion Authority and Chairman two international airports in Aviation, Rus Aviation, Sonic Jet, City and connected to the near- of Dubai Airports, expressed Dubai has paid off. Arguably SunGlobal, Skyline and United by Jebel Ali Port and JAFZA by a Dubai’s commitment to DWC. lacking any major international bonded road.” Aviation Services. “Phase one is the first step in brands in the airline industry to While some carriers com- a long infrastructure develop- date, Al Maktoum InternationThe list was kept under wraps until the opening, which plained that Dubai Airports ment project that over time al are sure to be burning up the led to speculation that Dubai was putting pressure on them will see our new airport trans- phone lines in a quest to secure Airports was facing difficulties to move by making life more formed into the world’s largest some big names, and big busiencouraging customers to move difficult at Dubai Internation- global gateway and a multi-mo- ness. Until then, all eyes are al, for example with additional dal logistics hub that plays an sure to remain on the airport. from Dubai International.

total retail sales in india could grow from $353 bn in 2010 to $543 bn by 2014 12

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July 2010 | www.logisticsweek.com

< news Company news

DHL Invests to Grow Share of Service Logistics Mumbai

rom final configuration to repairs and asset recovery, DHL is focusing on growing its share of the €3 billion outsourced Service Logistics market in Asia Pacific. DHL’s Supply Chain division announced plans to invest €50 million ($61 million) over the next five years to grow its Technical Services offering, part of its overall Service Logistics solution, and mapped out expansion plans for China, India, Japan and Singapore. DHL has also set up its first technical services competency center in Malaysia. According to the company’s

DHL has drawn up technical services offerings for Asia Pacific

estimates, the market is growing at about 25 percent per annum. Of that, Service Logistics services, especially Technical Services and repairs, accounts

for up to 60 percent of the overall spend. Across the breadth of its Express, Global Forwarding and Supply Chain locations, DHL

plans to custom build an endto-end Service Logistics solution, including Technical Services. DHL’s Service Logistics solution builds on a network of over 16 distribution centers and over 490 field stocking locations in Asia Pacific. For geographically expansive markets like China and India, the focus is on growing DHL’s Service Logistics footprint. DHL operates from 400 sites in China and 470 locations in India. It expects to double the number and increase its Service Logistics footprint in China and India within the next three to five years.

Apeejay to Set Up Logistics Parks in Bengal, Orissa together will spend rs 260 crore in phases; to come up on 120 acres of land Kolkata

peejay Infralogistics Pvt Ltd, a joint venture between Apeejay Surrendra

Group and Eredene Capital Plc, UK, hopes to commission the first phase of its two

The integrated park will have an ICD, warehouses, terminal and facilitation center

integrated logistics parks at Haldia (West Bengal) and Kalinganagar (Orissa) towards the end of this year. The company has recently received the Commerce Ministry’s approval for setting up an inland container depot (ICD) at Kalinganagar while the same for Haldia was received earlier. The Haldia integrated logistics park, estimated at Rs 200 crore in phases, would come up on over 90 acres while the one at Kalinganagar, costing Rs 60 crore, will span over 30 acres. The Kalinganagar logistics park would cater to the requirements of the steel units

coming up in the area since it hosts big names in steel such as Jindals, the Tatas, and the Visa Group. The Haldia outfit, on the other hand, would be bigger and more diversified because it would cater to a cross section of industry. In the first phase, the Haldia outfit would be complete with an ICD, warehousing facilities, both covered and open, truck terminal and trade facilitation center and other facilities. Similar facilities, though on a smaller scale, too were being created at Kalinganagar.

railways registered about 9 pc growth in freight traffic in apr-may 2010 14

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July 2010 | www.logisticsweek.com

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< news

CCCL Bags Goa Airport Contract Chennai

he Airports Authority of India has awarded Consolidated Construction Consortium Ltd a Rs 200-crore airport construction project in Goa. CCCL will build a 5 lakh sq ft terminal, with a capacity to handle over 8 lakh passengers annually, and a 1.6 lakh sq ft multi-level car park for the airport. The award of the new integrated terminal building at Civil Enclave, Goa, is the seventh repeat order from AAI. Contenders for the contract

were Nagarjuna Constructions, Era Constructions and IVRCL. Incidentally, it is only last year that CCCL made the transition to an infrastructure player from a construction company. The company’s total order book is Rs 3,560 crore to be executed over the next 18 months. In the infrastructure space, the company is also into power plant construction covering civil structures and moving fast into balance of plant, water and environment

and bridges. It is also getting into infrastructure development projects through its subsidiary CCCL Infrastructure Ltd which is setting up a food processing SEZ in Tuticorin, has emerged the lowest bidder for two automated multi-level car parking projects to be implemented on BOT basis. The two projects are to be set up for the New Delhi Municipal Corporation. The company is also looking at road projects, and water and oil pipeline laying business.

Sical Sells its Stake in CIT to PSA Chennai

SA International, Singapore, a leading container terminal operator, has bought out the 27 percent stake in Chennai International Terminals (CIT) from its joint venture partner, Sical Logistics, for an undisclosed sum. For Sical, it was a strategic decision to divest stake in the terminal and concentrate more on handling bulk cargo. The company will use the sale proceeds for the upcoming auto yard management project being done in association with Mitsui

RL Logistics Ltd has been awarded the Apollo CV Award for Best Practice Award Adopter of the Year, in Apollo-CV Awards 2010. VRL provides its customers with an entire bouquet of value-added services that comprises road transportation, express cargo movement re-distribution, courier services, passenger transportation & warehousing. With pan India services in 18 states, VRL Logistics has established a strong network of 1,000-plus branches to cater to customer demands and needs.

Bengaluru

I Sical’s decision to sell its stake is to enable it to concentrate on auto yard management project

OSK Lines at Ennore and other ongoing projects. Chennai International Terminals is the second private

container terminal at the Chennai port. The planned terminal capacity is 1.50 million TEUs (20-foot equivalent units).

Chennai

asby Group of Companies has tied up with Geometra International to offer its customers capabilities in the field of relocation (packers & movers), logistics and warehousing. Geometra has been in the

Bengaluru

Infolog pushes seZsoft to IT, mfrg

Casby Ties up With Geometra

apollo-CV award Goes to VRL Logistics

business of relocation over three decades from Singapore to other Asian countries. Casby has been in the port management and logistics arena for more than 15 decades. The JV holding is at 50:50

equity and is referred to as Casby Geometra Pte Ltd. Simultaneously, Casby Logistics has been awarded the Best Service Provider in the Secondary Distribution category by Director (Supply Chain) of Castrol.

nfolog Solutions has built software that can enable SEZ units to run its compliance operations smoothly by tracking procurements, managing assets and generating timely reports. SEZSoft is a comprehensive webbased solution for importexport compliance management for SEZ units. Its other add-on modules like e-procurement, asset management and inventory management link with the module helps users gain control of the system with the information on hand. The software is targeted at the IT and manufacturing segment and is priced reasonably, according to the company.

india has the world’s fourth largest coal reserves 16

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July 2010 | www.logisticsweek.com

< news RoaD

Trucks Shortage, More Cargo will Raise Truck Rentals New Delhi

he shortage of trucks on trunk routes in the last two months and increased demand for cargo transportation from agriculture and manufacturing sectors, saw truck rentals rise by 3-5 percent. The lower supply of trucks was mainly because of the non-renewal of new interstate national permits by various states in May and the nonregistration of new trucks due to confusion over the implementation of the new emission norms. Truck rentals on the trunk routes had touched a new high

after three years. Rentals from November 2009 to April 2010 went up by 21-23 percent due to the growth in the manufacturing sector. Cargo offerings during the same period were also buoyant with additional arrival of fruits, vegetables and continued wheat procurement. Simultaneously, in Kolkata though the Union Government has refrained from revising fuel prices upwards, truck rentals may increase due to an increase in tire prices in June. Tire constitutes 30 percent of the operating cost of trucks. According to the All

Increase in prices of tires add to the rental cost

India Tire Dealersâ&#x20AC;&#x2122; Federation (AITDF) overall tire prices are

up by 13-15 percent since January this year.

Truckers in the South Demand Toll Fee Reduction Tamil Nadu

ruckers in southern states and the Union Territory of Puducherry have demanded a reduction in toll fee and modification in toll rules. The South Zone Lorry Ownersâ&#x20AC;&#x2122; Association meeting,

planned to resort to an indefinite strike from August 2, if the Centre failed to meet the demands. Truck operators in Tamil Nadu are the worst affected as almost all important national highways have become toll

roads and on an average, each truck has to pay Rs 1,000 to Rs 1,200 a day on toll alone. The toll for the return trip between Tuticorin and Bengaluru amounts to around Rs 3,500. The association also re-

quested that toll should be revised only once in five years. Empty cargo vehicles should be exempted from toll fee, and the fee should be collected only for the extent of roads used by the vehicles.

Four Highway projects get Cabinet nod New Delhi

he Cabinet Committee on Infrastructure (CCI) has approved four highway projects worth Rs 2,536 crore. The highway projects would span five states that include Bihar, Gujarat, Madhya Pradesh, Uttar Pradesh and West Bengal. For West Bengal, the CCI approved four-laning of the 78-km long Krishnanagar-Bahrampore section of the NH-34 at an estimated cost of Rs 702.16 crore. The CCI has also approved the two-laning of the Muzaffarapur-Sonbarasa section of NH-77 in Bihar at a cost of Rs 512 crore. Other approvals include four-laning of the Jetpur-Somnath section of the NH-8D in Gujarat and two-laning of the Jhansi-Khajuraho section of NH-75 in Madhya Pradesh and Uttar Pradesh.

Truck operators pay up to Rs 1,200 per day on toll alone

government to raise ports capacity in india to 1,200 mt by march 2012 18

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#225, ST Bed Extn., 5th Main, Koramangala, 4th Block, Bangalore 560034, India. Tel : +91 80 40833366 www.uniworld-losgistics.com

< news poRT

Freight Market May Remain Volatile Hyderabad

lobal freight rates in the tanker and dry bulk segments have been near steady this fiscal, primarily because of the shortage of vessels on certain routes and scrapping of single-hull tankers. Analysts feel the tanker market may remain firm in the coming months, especially with world oil demand expected to increase. Overall, the shipping community feels that the market will retain some volatility in the coming months. Macro level developments in Europe also add to the unclear picture. In the tanker segment, Very Large Crude Carrier (VLCC) rates rose from an average of $25,908 per day in Feb-

ruary to $29,491 in March and $37,368 in April. But, there was a marginal dip in May. However, global fleet expansion could curtail fleet utilization in the long term — global crude and product tanker fleet are expected to register 11 percent and 12 percent growth respectively in 2010. Even though the global economy’s regaining of health could steady freight rates in 2010, ship-owners fear that the oversupply of new ships may not allow the rates to significantly firm up. Buoyed by the freight market, shipping companies, which had been guarded in their investments for fleet acquisition in the last two years, are now

Oversupply of new ships could allow rates to go up

beginning to revive their capital expenditure programmes. For instance, Essar Shipping has earmarked a capex of Rs 4,875 crore for the current financial year for its shipping,

drilling and ports businesses. Of this, it plans to spend Rs 1,000 crore each on acquisition of vessels and expansion of drilling capacity, while the rest will be spent on ports.

Fraternity Seeks Easing of Cabotage Law Ahead of Terminal Commissioning Kochi

s Kochi port prepares to commission the Vallarpadam Terminal, the shipping community has sought the relaxation of the Cabotage Law, allowing foreign flag carriers to carry cargo between Indian ports. The Vallarpadam Terminal can develop as a trans-shipment terminal for the sub-continent, only if foreign flag vessels are permitted to carry export/ import transshipment containers from any of the Indian ports to the ICTT or vice-versa. The need to develop hub ports in India is documented by the Planning Commission in its

Tenth Plan document where it recommends that the Cabotage Law be done away with to facilitate the growth of hub ports. Industry sources indicate that doing away with the Cabotage Law would help reduce the cost of logistics and make Indian products more competitive in the international market. The existing Cabotage rules, mandated by the Merchant Shipping Act, 1958, stipulate that the movement of container cargo between Indian ports should only be undertaken on Indian flag vessels. This means that a foreign shipping line,

Abolishing the law will reduce cost of logistics and make Indian products competitive in intl markets irrespective of whether it operates a feeder, non-feeder or mainline vessel, would not be able to carry a container either to or from Vallarpadam to any other port in the country. The ICTT at Vallarpadam was conceptualized as a ‘transshipment’ hub with the vision to offer credible competition

to Colombo, which has traditionally been the regional port of choice for shipping lines seeking to trans-ship their container cargoes originating from/destined for the Indian subcontinent. Using ICTT for trans-shipment would mean that shipping lines would be able to rationalize their ship deployments. Rationalized ship deployments and lower operating costs would mean lower voyage costs resulting in lower ocean freight, which will translate into savings for Indian exporters and importers.

turnover of auto component industry could touch $40 billion by 2015-16 20

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July 2010 | www.logisticsweek.com

< IntervIew

India as Asia Hub for Auto Logistics TVS Logistics Services Managing Director R Dinesh is chairing the CII Institute of Logistics’ Auto SCM 2010 event to be held at Le Royal Méridien, Chennai, on July 14 and 15. Among other topics, ‘making India the Asia hub for automotive logistics figures high on the institute’s event agenda. Excerpts from a related correspondence between R Dinesh and Aanand Pandey Lastly, Indian suppliers are increasing their global reach. And this is another reason why India will necessarily become an important hub in the global (automotive) logistics milieu. This is where CIL is looking at how to work towards the necessary changes and improvements in infrastructure, processes, regulations, etc. It is in fact the global automotive giants from Asia – Japan, Korea, etc. – who are making India a global hub for certain products of theirs.

R Dinesh, Joint Managing Director, TVS & Sons and Member, National Logistics Council

he CII Institute of Logistics (CIL) envisages India as the Asia hub for automotive logistics. Isn’t it too ambitious a vision, when we have industrial powerhouses like Japan, China and South Korea in the region? The theme is arising out of India emerging as the smallcar-manufacturing hub. As is well known now, companies like Maruti Suzuki, Hyundai, Tata Motors followed by a few others like Nissan, Renault have already made or stated intention to make India their production hub. This will necessarily mean that the supply chain will revolve around this intent. Further, India has a unique geographical adEvent: Auto SCM 2010 Organizers: The CII Institute of Logistics vantage in Asia. Therefore we see InVenue: Le Royal Méridien, Chennai dia emerging as an aftermarket hub Dates: July 14, 15 in the next few years.

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July 2010 | www.logisticsweek.com

CIL has been taking up the cause of the auto-logistics industry for many years, advocating improvements in areas like order accuracy, coordination across suppliers and assemblers, logistics infrastructure, tax uniformity, etc. Are you happy with the progress this industry has shown in these areas in the last few years? Yes, CIL has been actively pursuing the points mentioned by you. We see lot of progress in and by the various parties involved in the industry and we are happy to have played a catalyst’s role in this process. However, we still see a large number of areas that we can help improve and that is why this conference (see box) is being held to bring to light the imperatives on infrastructure, taxes, rules and information-sharing. These steps can and will make a difference in the journey to India emerging competitive not only in production but also in the inbuilt supply-chain and other support capabilities. We see in this not only a role for the Government – in whom many people find an easy target to criticize or pass on the buck to – but various users and players from the fields of logistics, IT and infrastructure, players whose timely actions and involvement can make a huge difference to the future of the industry. In short, we have made and seen progress on various fronts. However, more proactive steps are required to further strengthen and grow the linkages the supply-chain has with production and aftermarket support – a cause that CIL will continue to propagate.

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< COLUMN

3PL COMMANDMENTS Have an urge to fire your warehousing 3PL? You could have saved yourself the trouble if you’d followed Padmini Pagadala’s checklist of things to do when choosing the 3PL. Here goes

PADMINI PAGADALA General Manager, TPG Consulting, Mumbai

INDIA |

IF YOU ARE a staunch believer in the dictum that self-help is the best help, chances are that you are not with the right warehousing 3PL. Worse, chances are that somewhere down the line, someone did not do his homework at the time of choosing the 3PL. For one’s warehousing needs, one usually signs up with a 3PL, ideally never wanting to move. Shifting one’s house is bothersome enough and that is nothing compared to moving from a one-lakh sq ft Distribution Centre (DC) to another. Even more, there can be problems in a 3PL relationship that can make even the most happy-go-lucky manager rush to call in the moving company. Usually all such fall-outs can inevitably be traced back to someone who didn’t do his groundwork. Before we get into the ways to find the right 3PL, let’s explore the self-help option first. Do we really need a 3PL for warehousing (and allied transportation) needs? The reason most companies hire a Third Party Logistics Provider is that their volumes are low. It is cost effective to have a 3PL in such cases. Another big reason is that the companies

July 2010 | www.logisticsweek.com

are venturing into a new business. In the beginning, these companies would rather invest time in building their business than in running a warehouse or managing a transportation fleet. A business with huge demand challenges is also a potential candidate for 3PL. Such businesses would prefer to let someone else handle the troughs and the peaks at the DC level. Firms entering new markets typically get an LSP to handle the DC part of their supply chain. This is mostly due to their not being conversant with the local labor laws. In addition to the aforesaid reasons, MNCs such as Tommy Hilfiger continue to operate out of 3PLs to maintain performance levels. They reason that if the LSPs are doing a good job and driving costs down, why bring the burden on to oneself? To put it plainly, the criterion before you go in for a 3PL is to ask yourself whether the 3PL can do a better job of warehousing or transportation than you or not. This month, I bring to you my cardinal checklist of things to ensure you choose the right Logistics Service Provider (LSP) that can do your work for you.

Know Thy Needs Third party logistics providers run the gamut from people lending a tin-roof to companies who have sophisticated software, automation, and engineering talent. To find the right one, as a customer, you need to know what you need from the LSP. As a customer, you need to think whether you want just a tin-roof over your goods (or any type of space) or you need the LSP to tackle complex fulfillment needs, provide labor-intensive value-added services, or change the processes as and where required.

Data Data Data When you hand the RFPs (Requests for Proposal) out, it may seem strange to you to include your own operating costs in it. When LSPs look at your RFP, typically, they will hone in on the gaps present in the information provided to them. Usually, the LSP makes sure he adds in his buffer to protect himself in areas where he feels the data is inadequate. For example, you put in your RFP the duration of a particular peak demand period – when you will require additional manpower – as four weeks, as against the industry trend of, say, six weeks. And do not provide any reason behind the deviation from the norm. The LSP who has been around for a while will assume the worst and factor in the maximum buffer that can offset the gap in the data. On the other hand, the LSP that may not have a lot of experience may take the best-case scenario and not put in the buffer that can save him later. This issue often leads to customer disputes due to such misinterpretations. In either of the situations, the client loses.

Cost Structuring When you send your RFPs out, you must compel the LSPs to track costs in such a manner that you can compare your previous year’s operating costs with those of this year. Every year, your business is going to change or grow in some way. You need to be able to track the operating cost per unit/ case / pallet. This is also a good way to compare with all the bids that you receive.

Lower Cost Every Year This is a feat that can only be achieved if you were a GM (General Motors) or a GE (General Electric) outsourcing your entire region to a service provider. In the West, when companies as big as GE or GM negotiate with an LSP, they typically write into the contract that the operating cost-per-unit shipped has to go down by, say, 3 percent every year. This could be tied in with a promise of increasing volumes with every year. Reducing per unit operational costs every year is not an easy task. But the giants ask for this in the belief that if an LSP performs the same functions year after year, then the per-unit operational cost ought to get better

every year. This is one way you could challenge your LSP and ask how they can reinvent themselves every year.

Know What You Are Paying For When they walk into an LSP’s warehouse, most customers assume that the material handling equipment (MHE) that they see in the facility will be available for their use – for free. This is often not true. Service providers charge the client – sometimes as much as the full capital cost of the forklifts and other equipment that need to be used for them. This is truer in the case of WMS (Warehouse Management Systems) when the number of users needs to be increased because of increasing business. Also, the software licenses that will be bought could be charged in entirety to the client although the LSP will have the right to carry on using them even after the client closes his business. This is something that as a client you ought to be aware of before you sign on the dotted line.

In the West, big companies write into the LSPs contract that the op cost shipped has to go down by 3 pc every year. When Things Do Go Wrong My landlord from whom we have leased our office space tells me that when things are great, the contract is only a mere piece of paper. But only when he and I have a problem does the contract assume the form of a legal document. I would probably have smiled it away if not for the fact that I had spent a full week reading and re-reading the contract, negotiating on the terms and getting certain things changed – merely because I never wanted a chance for either of us to say, “Let’s look at the contract.” When it comes to your warehouse, you need to tread this area even more carefully. Sometimes, things don’t go well and at such times, after exhausting all your problem-solving skills and your managerial charm, you need to have good arbiters or clauses in your contract to be able to exit. While the nature of the agreement and costs are basic, you could look for qualitative metrics that your LSP could provide you. And above all, the client needs to make sure that the LSP is a good cultural fit in the organization, that is, the LSPs’ principles have to befit your organization. I hope the list helps a bit with your homework of choosing the right 3PL for your company. INDIA |

July 2010 | www.logisticsweek.com 25

< Guest column

AdvAntAge M Are you losing sleep over your trucks fetching poor margins? Is your transportation provider giving you the jeepers with increasing costs or frequent outages? Piyush shah gives you a game-changer

Piyush shah Assistant Professor Operations, SP Jain Institute of Management and Research

INDIA |

he net margins of transportation service providers are usually as low as 3 to 5 percent. Major parts of the costs are predetermined. Fuel would be around 60 to 80 percent, breakdown and basic maintenance cost around 10 to 15 percent and the rest would be made up by driver salaries and other miscellaneous expenses. The interest and cost of acquiring the capital would also add to reducing the wafer-thin margin significantly. Given the abysmally low margins in this business, service providers spend sleepless nights thinking of ways to increase the utilization. There is a desperate hunt for part-loads, for example, to fill any existing vacant space in a shipment. All possible means are also explored to avoid empty back-hauls. In this entire activity, transportation firms are losing sight of the one single cost header that can drastically change the nature of their business. This function can increase revenues by at least 15 percent, reduce expenses by around 10 percent and significantly impact the vehicle availability and utilization. This particular lifesaver is none other than the vastly underrated function called ‘fleet maintenance’! Systematic fleet maintenance can have a solid impact on all performance metrics. It can increase fuel efficiencies, reduce breakdowns and generate more customer satisfaction. Realizing this, industries in general have for long focused on maintenance best practices. Information technologies help trace and minimise maverick spend on maintenance activities. The Japanese techniques of ‘Total Produc-

July 2010 | www.logisticsweek.com

tive Maintenance’ ensure that the maintained machines become reliable. Operations-research-based replacement techniques ensure optimum trade-off between the cost of replacement and cost of failure. Unfortunately, to the best of one’s knowledge, none of the above is unfortunately being practiced in the transportation sector.

the conundrum in logistics In the manufacturing, hospitality or healthcare sectors, all the main resources are at one location. A maintenance team can easily be formed to take care of all the current or potential problems. For logistics service providers (LSPs), their resources are continuously on the move. The trucks are tracing the corners of the country with very little predictability of the running course. It is very difficult to expect a truck to be at a definite point of location at a given point of time. Hence, planning for truck maintenance at a determined time or location is a matter of real challenge for an LSP. The lack of location predictability is not the only problem. The technical knowledge of the driver may be inadequate when it comes to reporting problems. The driver may also not be motivated to report failures. The same drivers usually do not drive the same truck every time and cannot (and should not) be held responsible for breakdowns that occur on another driver’s watch. Also, failures, especially the minor ones, largely go unreported since they would look bad on a driver’s worksheet. Also, a truck specifically brought in for maintenance would have a one-way empty haul.

Then there is the maintenance downtime cost. There is virtually no record-keeping of any kind on the performance of the vehicle. In manufacturing, it is normal for the pressure of a pump to be recorded once during every shift. No such documentation is done in logistics. In case of a breakdown in remote locations, the driver is allowed to buy the necessary spares and also pay for the repair services. In a way, unchecked spending is institutionalized for some LSPs. One of the biggest reasons for this fact being ignored is that the direct cost in logistics is small and sporadic. While the total cost of maintaining the fleet may be large, and hence accounted for, the cost incurred per engagement per truck is not a large sum – in many ERP (Enterprise Resource Planning) systems this sum is not tagged as a maintenance expense and it is difficult to realise the total direct cost at the end of the year. Since the cost ‘seems’ to be small, obviously it gets less management attention.

Business impact Ignoring such costs has a direct impact on three scores. One, the cost of maintenance increases substantially. This impacts the bottom-line. Second, the asset availability drops. More vehicles are needed to haul the same amount of material. This pushes up the capital needed to do business. Third, customer satisfaction takes a beating. A customer will not tolerate frequent variations or delays in shipments. This will impact the revenues. Poor maintenance practices have an impact on all the segments of financial statements revenue, expenses and the RoA (Return on Assets). The total impact could be significant. In this age of competition and high capacity, good maintenance is a compulsion. If it’s any solace, the entire transportation industry has the same problem. The cost impact would thus be loaded in the expense statements of all LSPs. Customers have to somehow survive with an entire industry that is unreliable on this count. The other way to look at this is that sound maintenance planning can be a big source of competitive advantage. In an industry plagued with poor performance on this score all around, a slight improvement could easily catapult the organization to a leadership role.

measuring the impact The cost of maintenance spares are a direct cost. If a vehicle is repaired in a garage that is not owned by the logistics firm, the extra cost incurred should also be added to the tally. The costs have to be further classified as preventive and corrective. The oil change is a preventive activity and changing a leaking coolant line would be corrective. The cost of reduced performance would have to be recorded. A two-axle truck filled with FTL (Full-Truck Load) of 9 ton could be expected to have a peak speed of 75 kilometer-per-hour and a fuel efficiency of 5 kilometer-per-liter. Any deviation from this would be a cost. The fuel-efficiency cost would be easy to calculate. If a vehicle works at a mileage of 4.7 liters-per-kilometer, the fuel efficiency cost would be the cost of additional fuel used up to cover that distance. For the speed loss, the cost would be the cost of distance and haulage opportunity lost. Moving at, say 35 kilometers-per-hour, the truck would have covered the distance faster and would be available to transport additional cargo. The cost of reduced performance would have to be measured and recorded for each vehicle separately. The final cost is the cost of customers lost due to poor service. To be able to calculate this, the logistics organization would have to keep track of lost customers and also tabulate the reasons for the loss. The firm would have to create some basis for the cost of lost customers. In a way, this cost could be found out by dividing the marketing and advertising expense by the number of new regular customers. This calculation would be based on certain assumptions. It could also be calculated on a perspective of reduced profits because of the lost customer. In many cases, causes for major accidents can be traced to poor maintenance. While the failure of the braking system can cause an accident, the systems failure could in turn be caused by contaminated oil, leakage or wornout parts – all signs of poor maintenance.

SyStematic fleet maintenance can have a Solid impact on all performance metricS. it can increaSe fuel efficiencieS, reduce breakdownS and generate more cuStomer SatiSfaction

total cost of poor maintenance = (breakdown maintenance + preventive maintenance) + cost of reduced performance + cost of lost customers

INDIA |

July 2010 | www.logisticsweek.com

< Guest column poor maintenance practiceS have an impact on all the SegmentS of financial StatementS revenue, expenSeS and the roa (return on aSSetS)

INDIA |

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July 2010 | www.logisticsweek.com

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should be linked to corrective maintenance costs. A specific amount could be allocated for maintenance. Any savings then could be shared among the drivers on the basis of distance driven. This incentive would have to be on quarterly- or half-yearly basis as the drivers may postpone change of spares on a short term to claim the incentive. A maintenance department would have to be created with a focus on minimizing the total maintenance cost. The department need not be staffed with a crew of technicians â&#x20AC;&#x201C; the repair could still be outsourced. However, the department could have experts who can understand and analyse failure. The maintenance department would be concerned about monitoring the preventive maintenance. Most breakdowns occur because the preventive part has been neglected. Major heavy vehicle accidents are due to worn-out tyres. The department could use quality tools like Pareto analysis to analyse breakdowns and work towards reducing them. A problem like the maintenance Process The first step would be to put maintenance as a engine seizure could merely be a symptom part of the performance measurement for the for some deeper malaise. Tools like the Pareto chart (see graph) and root-cause analysis vehicle drivers. Since the drivers would not be driving the could be used in such cases. One of the tasks of this department same vehicle every time, the performancemeasurement part of the formula would have would be to introduce a documentation systo be a group-based metric. The incentives tem. There has to be a system of compulsory inspection by the driver at the beginning of every trip. Along with start up (A sample for Pareto Chart Analysis) this there could be a detailed vehicle inspection twice a year. These reports would form the basis for analysis. Every vehicle would have to be measured for its performance. Metrics like fuel efficiency, spares replacement, oil change, etc. would have to be tracked consistently. In fact, large trailers could also be measured for metrics like temperature of exhaust. A higher temperature here could indicate a problem with the supercharger. A reduction in fuel efficiency even by a few points could be an indicator to an impending breakdown. The wearing out of brake liners in a particular vehicle faster than the norm could again be used as a leading indicator. Assuming that accidents are rare, this cost could be kept out of calculations. However, with every incident of a crash, the firm needs to look deep for the cause and create a policy to avoid such events in the future. Along with this the cost of litigation for claims arising out of an accident has also been ignored. Calculating the total cost of poor maintenance in this manner is bound to raise a few eyebrows. Since maintenance happens in small chunks, the total impact is never realized. Also, the impact on the customer side is usually never accounted for. The total cost would be a summation of all the three costs mentioned. Standard Transportation Management Systems (TMS) and ERPs may not be tuned to give the data in the required format. Logistics firms will have to resort to tagging of costs as maintenance, reduced performance or lost customer, so that the data can be retrieved and acted upon.

Designing the maintenance process 1. Include maintenance as a KRA for drivers 2. Set up an analytical maintenance department 3. Create a record keeping system 4. Train the drivers 5. Generate a maintenance based dashboard for top management

It is necessary to train the drivers continuously and keep informing them about the best practices in handling the vehicle. The training sessions have to be innovatively designed so that uneducated drivers can get the message. In the course of their work and interaction with others, the drivers are sure to pick up wrong practices or forget the best practices of the training. That is why the training has to be continuous. It could be a two-hour video that a driver sees and answers a simple test on a touch screen. The driver could be given the flexibility in seeing the video and appearing for the test within a time period at any of the major locations. Overall, a metric that is tracked by the top management is generally achieved. A dashboard of maintenance has to be created and monitored by the top management. The dashboard could include simple things like hours lost due to maintenance, total cost of poor maintenance, etc. for a particular period. Top management must make it a point to bring up this metric in their interaction with the operations.

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the complete Picture Bad maintenance is actually a symptom of a poor organization. Unfortunately, the indirect impact of poor maintenance is significantly higher than the direct impact. This has ensured that the function stays at a low priority in logistics companies. Effort is put at creating stop-gap arrangements and somehow getting the vehicle to run rather than instituting a specific process. The mindset in this area is still to attack the existing breakdowns as fast as possible. The fact that these breakdowns can be reduced has just not sunk in. Designing a maintenance process can easily be a good source of advantage for any LSP.

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< guest Column

The Big

Backstory The reverse-logistics capability of a company can make or mar its brand image. Hitendra Chaturvedi lays out the criticality of reverse supply chain

Hitendra CHaturvedi Founder and CEO, Reverse Logistics Company

n simple terms, supply chain in any industry has two components – forward, when products or services move from the origin to its destination; and reverse, when a product or service moves in the opposite direction i.e. from the consumer back to its origin. This movement back can be for many reasons, including defects, end of life, warranty, overstock, discontinued line, etc. Simply put, reverse supply chain is defined as all activities associated with a product or a service after it is sold. India sees a return rate between three and five percent which means that anywhere between Rs 60,000 -75,000 crore worth of products traverse the journey back through a largely inefficient reverse supply chain process where we spend another Rs 30,000 crore to move or process or store them. Supply-chain efficiencies in our country are improving but they still rank abysmally low on the global scale. As a matter of fact, India still loses about 3 percent of GDP (around Rs 1.5 trillion) to supply-chain inefficiencies. Our supply-chain landscape is highly fragmented, replete with inefficiencies, and exacerbated by the omnipresent red tape. Reverse supply chain performance is even worse!

Why reverse supply Chain matters Reverse SCM (Supply Chain Management) matters because it makes business sense. Indian customers are becoming very demanding – now we want services that are world class. A recent research from Reverse Logistics Company (disclosure: the author is the Founder and CEO of RLC) indicates that over 50 percent of customers with bad return experience will not buy from that brand again. This

INDIA |

July 2010 | www.logisticsweek.com

means that a brand may lose anywhere from 4 to 5 percent of its customer base if the return experience is poor. RLC’s initial analysis across many OEMs (Original Equipment Manufacturers) highlighted a startling fact – that in 70 percent of the cases, the cost to process a returned product can be higher than the value of the product! For example, if a mobile phone worth Rs 3,000 is returned, there is a high probability that the cost involved in managing its return (call center, transportation, warehousing, repair, etc.) will be greater than Rs 3,000. This means that due to inefficient returns management, every return could be bleeding the OEM. Returned products lose value every passing day. What this means is that if you have a defective mobile sitting somewhere in your reverse supply chain for over a year then it is as good as scrap. The power of reverse supply chain lies in the data but 90 percent of the companies we surveyed had zero visibility into returns data. Return data visibility can highlight factors like customer abuse patterns, product defects, trends, etc. – factors that can be of immense value while planning marketing, sales, and product development efforts. As India considers strict laws to regulate e-waste, companies must know what is happening to their obsolete, surplus and defective products. They can no longer dispose of such products in the secondary markets and consider themselves immune to repercussions if the products harm the environment. From a business point of view, selling returned items to the highest bidder in the market, not knowing what the latter will do to the product, may be a ‘penny-wise-pound-foolish’

strategy for a brand. Many of these products go back into the channel and get sold as new. This not only cannibalizes the new product sales of the company but also tarnishes the brand image as many of these products don’t get repaired in compliance with OEM standards. Buyback programs – like the ones often organized by Indian retail chains – are great strategic plays to acquire new customers but in the absence of a structured ‘returns process’ this execution may not happen and the brand even runs the risk of losing competitive advantage. What this means is that successful companies focus on their core competencies – delighting customers through forward supply chain. What many don’t realize is that managing an efficient reverse supply chain can create a competitive advantage. Our experience shows that efficient reverse supply-chain strategies can help reduce supply chain costs by 25 to 40 percent, increase the asset recovery of returned goods by a factor of four, boost productivity by 10 percent, profitability by almost two percent, and all this in proper compliance with e-waste regulations.

else’s problem’ or fault, it is too easy for managers to fall behind in processing responsibilities. Not having a process owner also causes a certain ‘leakage’ in the system. A leader with management authority, empowerment (and budget) to manage all aspects of returns processing will drive improvements.

to outsource or not

Many companies ask if reverse supply chain is so strategic, why they shouldn’t do it themselves. The answer is simple: With product return rates in India ranging from three to five percent, companies do not have enough volume to justify the cost required. An efficient reverse supply chain requires investment in customized technology, processes, infrastructure, people and all this has significant costs. The western world has learned these lessons and most of its companies outsource their reverse supply chain to specialists. The Indian industry seems to be following this trend. In a recent study conducted by the D’Essence Group, a Mumbai-based consultancy, 55 percent of Indian companies surveyed plan to outsource their reverse logistics immediate steps process over the next five years. In order to put in place an efficient reverse SCM For companies that are doing reverse strategy, companies could take the following supply chain in-house, activities such as two steps at the earliest: returns-transportation outsourcing or surImpact Assessment: Over 95 percent of compaplus (or overstock) sales don’t fetch the denies we surveyed had little or no handle on the sired benefits. These are firefighting measimpact of reverse supply chain on the bottomures that come into play when inventory line. If not managed well, returns can eat into needs to be cleared. If a company plans to the health of the company. outsource, it must select a partner that has Fix Responsibility and Empower: Returns are a the knowhow, the infrastructure, people, as secondary responsibility for many managers. well as the IT infrastructure in place. Since most of the returns process is ‘someone With regulations looming over electronic waste it makes sense ManuEnd for Indian companies, particularly Supplier Distributor Retailer Consumer facturer OEMs, to look at their reverse supply chain – not only to gain competitive advantage, but also for good corporate governance. As organized reverse supply chain gets recognized Recycled End of Life Refurbished and funded by global players in India, Damaged Warranty many of the OEMs could finally have Shelf Pull Overstock a solution that they have long been Returns waiting for. Discontinued

An efficient reverse supply chAin requires investment in customized technology, processes, infrAstructure, people And All this hAs significAnt costs

Scrap

reverse supply Chain

The author is can be reached at hitendrac@reverselogistics.in INDIA |

July 2010 | www.logisticsweek.com 33

< Cover Story

Forward march 34

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HyperCity Indiaâ&#x20AC;&#x2122;s supply-chain team, led by Lieutenant Colonel Vijay Nair (Retd), works with a precision and a level of sophistication that would surprise many. An inspiring story of a home-grown supply-chain team that holds many takeaways for logistics managers, brought to you by Pamela Cheema INDIA |

July 2010 | www.logisticsweek.com 35

< Cover Story

ndian retail is galloping up the growth curve in a welcome surge of expansion. Although Europe and the United States have not been able to emerge decisively from the shadow of the recession and are, in fact, facing a period of bleak austerity, retail in India currently faces a future full of promise. According to industry sources, though organised Indian retail has a mere five percent of the retail pie, it is currently worth $25 billion, a figure which is set to treble in the next five years. HyperCity Retail (India) Ltd., which is part of the K Raheja Group, is a vibrant manifestation of the resurgence of retail in the country. Rows of neatly and aesthetically

arranged fruit, vegetables, meat products and consumer durables line the shelves at the HyperCity store at Malad, Mumbai, which was the first store inaugurated by the Group in the country four years ago. The vast range of products on sale covers the entire gamut from food, home decor, furniture to footwear. The doublestoried store offers the customer ample space to view the products leisurely, inspect them carefully and then make a choice.

Standing tall As a store, HyperCity combines the elegance of a premium departmental store with a convenience store where a plethora of products are available

at affordable rates. “Actually, this is our store’s USP,” beams Lieutenant Colonel Vijay Nair (Retd), General Manager, Supply Chain, HyperCity. “We have an excellent shopping atmosphere, our store is also beautifully laid out with a very wide range and value proposition.” HyperCity Retail has seven stores across the country at Mumbai, Vashi, Thane, Hyderabad, Bangalore, Jaipur and Amritsar and a central Distribution Centre at Vadape, near Bhiwandi, Maharashtra. The warehouse spans 2,50,000 sq. ft and is the Distribution Centre for the entire chain of stores. It services 800,000 sq. ft of retail space spread out across its various stores in the country. “We are saving on expenses with this central DC,” remarks Nair.”End-to-end it is still beneficial for us to have just one central DC and with the implementation of GST, it will make even more sense.” Though the single DC at Vadape services a huge area, supply chain operations at the hypermarket chain have been streamlined to a commendable degree with just 130 employees. Says Nair proudly: “I have created a niche and a separate customer profile.”

No Fixed Ideas Lt. Col. Vijay Nair with 20 years of army service, is the quintessential army man with great enthusiasm for

HyperCity Fact File*

LT.COL. VIJAY NAIR, (Retd), General Manager, SCM, HyperCity Retail (India) Ltd.

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Number of stores 7 Supply Chain 130 Employees Live SKUs 66,000 Total Retail Space 8,00,000 sft Transportation Five transporters Service including Gati and Providers VRL Logistics Technology JDA, IBM Providers *All the facts in the box are culled from media sources and interview transcript and are only indicative. For accurate information, please contact the company

< Cover Story his subject who was chosen by the previous CEO, Andrew Levermore, to head supply chain. “I did my MBA in HR (Human Resources), but Levermore insisted that I was suited for logistics,” laughs Nair heartily. Levermore was particular about HyperCity building its own legacy. “When we started HyperCity, Andrew said that he wanted an organisation with no baggage or background or previous legacy in logistics, which I think was a very strong strategy.” The first store was established with highly motivated, but raw talent who were expected to work in the warehouse, a procedure which continues even now where fresh management trainees are put through a rigorous 15-day work capsule at the warehouse. The blowback is that management executives have a vastly improved understanding of supply chain. Despite the country’s meagre infrastructure and other inescapable odds such as manpower challenges and red tape, that afflict supplychains of all user companies, the hypermarket chain has created a lean supply chain network and is achiev-

ing performance levels that are the best in the business. Its shelf fill rate and order fill rate are much above the India average, the supply-chain is cost efficient and the supply-chain managers maintain close relationships with both transporters and the top suppliers.

the ringside view Nair reveals the intricacies of their supply chain network which help them to service their stores. For Mumbai stores (Malad, Vashi and Thane), all products other than perishables are supplied by the DC. For all the other stores located across India home products, sports, toys, etc. are supplied from the central DC, whereas CDIT (Consumer Durables, IT and Telecom), FMCG products, and perishables are procured locally. The Group maintains 66,000 live SKUs (Stock Keeping Units) at any given time, but prefers to run the entire supply-chain on its own, except transportation, a function that it chooses to keep flexible. Says Nair: “Including Gatti and VRL, we have five or six transporters whose rates are easily available and then we take the best rate.” Nair services the retail stores with a supply-chain team of 130 employees – surprisingly small given the expanse of the operations and the delivery of best-in-league benchmarks, “The numbers are likely to go up,” indicates Nair, “when more DCs open across the country.” To give any idea of the scale of warehouse operations, approximately 100,000 units are handled every day at the central DC.

Including Gati and

VRL, we have five or six transporters whose rates are easily available and then we take the best rate

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Seasonal flows From June, sales start escalating and peak in October. November sees a dip, while December, especially around Christmas,

sees a surge in sales. From JanuaryMarch sales hit a trough, and April and May witness a moderate rise in sales. To aid in demand forecasting, customer footfalls are carefully measured at the hypermarket; customer entries are scoured on a day-to-day basis and reviewed on a weekly basis. With a fluctuating sales graph, buyers are in constant touch with vendors to keep abreast with the highs and lows of sales and replenish stocks. HyperCity has a B-to-B (business to business) site which is inte-

grated with its Enterprise Resource Planning (ERP) and is accessible to vendors. The site was launched in 2009 and is supported by an IT team from IBM. “With this new facility, the vendor who has been provided with a login, can actually look into the site, get to know the complete details about the movement of his merchandise, the payment of his bills, etc.” reveals Nair. The hypermarket chain has approximately 2,000-3,000 suppliers (including the vendors who supply perishables). Perishables for Mumbai and Thane are generally purchased

from the APMC market at Vashi, Navi For material handling, the DC Mumbai. uses battery operated pallet trucks which increase productivity considerably as opposed to hand jack pallet tech Prowess HyperCity has invested heavily in trucks which take 12-14 minutes for technology which has spruced up its each use in the warehouse. The scanners used for picking at operations perceptibly. The supply chain team works on JDA supply chain the warehouse used by HyperCity are management (SCM) solutions on IBM integrated with the ERP. The Centre Systems platform. It uses a range of does multi-store scanner-based picksolutions including the merchandise ing, where in one visit the picker can management system (MMS), the ware- pick products for three stores, thus house management system (WMS), the reducing travel time within the DC automatic store replenishment module and maintaining a lean labour force. (ASR) and the automatic warehouse re- “We are big believers in technology. That’s how we have been able to manplacement module (AWR). INDIA |

The store combines the elegance of a department store with the affordability of a convenience store

July 2010 | www.logisticsweek.com 39

< Cover Story age with a lean and efficient team for our stores!” says Nair proudly. HyperCity got a Silver Edge Award for its Distribution Centre Management System. This was awarded by the June 2009 issue of Network Computing magazine. When asked about whether the warehouse uses the RFID (Resource Frequency-Identification) technology, Nair minces no words. “"We have put our thoughts to RFID. But it's just not viable because of the costs involved. The larger products don’t get lost and for smaller products it (RFID) is just too costly. For the moment we are not even considering it."

Cost efficiency Just as HyperCity Retail has been able to slough off old methods and attitudes in its swift adoption of technology, it has been able to trim supply chain costs at all levels – transportation, packaging and delivery. In the sphere of transportation, the hypermarket’s main providers are Gatti and VRL, and talks are on with a panIndia express-cargo company. Vendors are urged to utilise these transporters and thus optimise on cost. The buying team lays particular emphasis on maintaining accuracy of inventory levels, thus limiting warehouse costs. The owners of the chain were extra judicious in choosing the warehousing location and negotiating the lease – they worked closely with the developer at the time – a wise move that keeps the running costs at a very reasonable level year after year.

T i m e l i n eInspired Performance

Workers at the DC are offered incentives to maintain productivity at a certain peak level. Remarks Nair: “People often mention that cash incentives increase costs, but I tell them that in the long-term a happy work force reduces costs!” To enhance productivity, cross docking for certain stores is done in a separate area at the Distribution

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Centre. “We advise our vendors to bring products in three lots, the Hyderabad lot, the Bangalore lot and the Mumbai lot,” elaborates Nair. “The Hyderabad and the Bangalore lots are cross docked and this saves on our costs and time.” HyperCity Retail also pays its octroi taxes online which slashes its transport costs, waiting time of trucks at checkposts and allows the hypermarket to service its other stores simultaneously. When the retail chain, like the rest of the industry, was reporting interminable delays at Mumbai’s octroi nakas, Nair thought of using the then newly introduced online octroi-payment facility. But despite several reminders and emails requesting the same, there was no response from the authorities. That’s when he decided to cut through the red tape. He requested a meeting with the then Mumbai Municipal Commissioner Jairaj Pathak and it was duly granted. The rest of the road (pun intended) was smooth. The upshot is that HyperCity has been paying taxes online ever since. Now the turnaround and utilisation rates have improved, and the transportation cost has come down. "Earlier a truck driver would go to the Malad store first and by the time he had gone through the octroi, he was not fit enough to travel to Thane. That has changed today. With one vehicle I am managing two stores. Otherwise all these stores had their own vehicles," he beams. Moreover, the team maintains excellent scores on key parameters. It reports a shelf fill rate which generally hovers above 97 percent. This feat which has been achieved not only by increasing productivity, but also by reducing errors and delays – the two big hydras of any supply-chain operation – has been attained by using time-honed strategies. For example, about 80 percent of the operations at the warehouse are

scanner-based which goes a long way in reducing all types of handling errors. Productivity at the DC is amplified – and the counting errors reduced – by encouraging the workers to count in their mother tongue and training them to write the numbers in English. A worker who commits an error notes it in a register kept for the purpose. The worker’s salary is not cut, but he realises that his work is under scrutiny. Notably, the worker with minimum entries against his name is given incentives in the form of salary increments, or rewarded in

other innovative ways. To reduce transport delays, Nair makes good use of feedback mechanisms. “We monitor and give feedback. If an inbound transporter does not deliver on time, we give him feedback. Also, we maintain fantastic relations with him.” The productivity of each department is carefully monitored and this in turn ensures desired inventory turn ratios. The inventory turns differ with various categories of products – for instance, food items have an inventory turn of four weeks, imported products eight or ten weeks and do-

mestic products four-six weeks. With fashion products and apparel, the inventory turn is slower and minimum stock is often held for 12-56 weeks. This year, the order fill rates are up by around 10 percent from last year’s rates of 72 to 80 percent. Partly, the uptick has been achieved because of the active involvement of vendors. The order fill rates are available on the B-to-B site; vendors send their feedback and their ability or inability to fulfil orders. But Nair sees room for improvement on this score. “Their (vendors) supply chain is very challenging,” stresses Nair. “Also,

at times, they may not have enough numbers to give us, as well as to other retailers like Big Bazaar, etc. Very often, these are the reasons behind order-fill gaps, but it impacts all retailers.” A quarterly inventory audit is another way to ensure that the Distribution Centre meticulously avoids errors. This ensures that the inventory remains correct and the location is better managed. Slot audits –25,000 of them – are performed every day at the rate of four slots a day. Elaborates Nair: “If a category is doing well and seeing business of 99 percent or 100 INDIA |

Surveying the vast range at the store

July 2010 | www.logisticsweek.com

< Cover Story Where the Heart is

heets of rain beat down on our car as we drive through a verdant countryside, almost magically revived by the much-awaited south west monsoon. We are headed towards Vadape, 65 kms from Mumbai, where the central DC of Hypercity Retail is located. The cavernous DC is inside Shree Raj Lakshmi warehouse park and has been

configured with WMS. Chetan Rawat, manager, logistics, who overseas operations at the DC mentions that “100,000 units move into the DC every day, with a container load of products leaving for Hyderabad daily.” Significantly, the Hypercity Retail DC has also embarked on corporate social responsibility programmes. It has adopted a girl’s primary school and along with Kotak Education Foundation, the company is training local youths in warehousing techniques, thus enhancing their employment opportunities. It is also planning to green its supply chain by installing solar panels The central Distribution Centre at and introducing rainVadape, near Bhiwandi, Maharashtra water harvesting.

percent fill rate, we do not audit that slot. But if a category is not doing well and is doing just 92-93 percent, we audit that slot and the fill rate automatically improves.” The company also utilises the Global Data Synchronisation Network (GDSN) which allows the user to access the vendor’s data to get the product description and its specifications to weed out possible mismatches. Even if all the other aspects of a business are neatly in place, the supply chain of an enterprise could still founder and profit margins could be squeezed if certain other functions like order compliance, and demand forecasting is not finessed to a high degree of efficiency. Of equal importance is the lead time given to vendors. The company issues vendor agreement forms in which the latter commit their lead times. He advises that a company must maintain good relations with its vendors. From the current year, Hyper-

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City has embarked on a new exercise known as the supplier-relationship programme. “This is being led by me, “ explains Nair, “where we just meet the top 15 vendors and try and create a relationship, so the next time I pick up the phone, I know who they are and then automatically there will be a difference in the relationship.” The hypermarket chain had situations of inventory surplus during the recession when sales suddenly dipped and some store expansion plans had to be put on hold. That lesson learnt, Nair has moved on. “I have passed the phase when we had high inventory. In fact, no retailer would buy large amounts of inventory because the environment dictates that your inventory could suddenly go up. Finding out the reason for high inventory and learning from it is important; but equally important is the strategy that you must have to liquidate the surplus. The timing of liquidation is a very, very important

part of the strategy,” he says. High distribution costs can paralyse entrepreneurial vim. The hypermarket chain optimises its transportation costs by utilising its truck capacity fully. If only half a truck is full of furniture, for example, the other half is filled with other products to ensure maximum utilisation of both weight and volume. “It’s really a question of optimising at the warehouse,” emphasises Nair. “Make sure your workers at the DC are cost conscious and how do you make them conscious? Anything that moves must be recorded at the DC. If a truck comes, take its weight and volume and go through the processes of optimisation.” Careful selection of the site of warehouses would also assist in lowering costs.

Swift expansion In a recent interview to CNBC TV18, B S Nagesh, vice chairman HyperCity Retail (India) Ltd, while announcing his move to up the stake of Shoppers Stop from 19 to 51 percent, said that the Group’s target is to add three-four stores every year and take it to a tally of 26 stores over the next five years. In terms of revenues, HyperCity’s current stores are on their way to see break-even by fiscal 2012. Apparently, Nair’s deft hands are going to be full with targets and new benchmarks to achieve. Fortunately for Nair, he can always draw inspiration and strength from his years spent in the army. Writing an extensive article on logistics superiority for a military magazine (the article has still not been published) Lt. Col. Nair explains how “retail logistics can benefit from looking at what the army does well.....good leadership, managing individuals and teams and learning how to relate information and data to ground realities.” Apparently, it is these lessons learnt and practiced which is helping the hypermarket supply chain team tread the path of excellence.

< Guest column

How about

middle infrastructure? For the country to continue its growth trajectory the development of logistics infrastructure is required, writes Vineet Agarwal

Vineet AGArwAl Executive Director, Transport Corporation of India (TCI)

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he Indian economy registered 7.4 percent growth in the 2009-10 fiscal and the government is expecting the GDP to grow at around 8.5 percent in 2010-11. A number of factors like the fiscal condition of the economy, the focus on agriculture and the health sector etc. will determine whether we can achieve this growth rate. There are several other issues on which this growth rate impinges â&#x20AC;&#x201C; the pertinent one among them being the availability of infrastructure (both qualitatively and quantitatively) â&#x20AC;&#x201D; which will ensure this growth trajectory. As in most other developing countries, sound infrastructure will be the backbone of the Indian economy and play a significant role in its development. The development of every sector in the country is directly or indirectly linked to infrastructure and this applies to the logistics sector as well. For too long has poor infrastructure been a hurdle for the logistics sector, but lately the government has been taking several initiatives to improve it. There has been a lot of focus on hard infrastructure building with planned and enhanced activities and many projects such as the construction of airports, ports, industrial parks, roads, highways and dedicated

July 2010 | www.logisticsweek.com

freight corridors etc. There have also been some significant developments in improving soft infrastructure such as paving the way for GST, solving certain taxation issues, looking for solutions for seamless movement, the use of technology in various applications, all of which fall in the category of soft infrastructure.

three-tier model When we talk about an efficient and successful infrastructure design, it should be a three-tier model which comprises hard infrastructure, soft infrastructure and middle infrastructure. Middle infrastructure connects the hard and soft components and makes the whole model a success. This category consists of warehouses, multi-modal logistics parks, cold chains, cross docks, etc. It also includes the right linkages to truck terminals, transport nagars, toll collection systems, checkposts, anything which facilitates trade both directly and indirectly and makes the entire process function in a seamless manner. Even though a preliminary base has been made for building infrastructure in the country over the last decade, it is still not substantial. Unfortunately, there has not been much focus on the upgrading and improving of this

middle infrastructure. There is a grave need to create large scale warehouses, logistics parks, hubs, modern truck terminals and set up cold chain networks in the country. The construction of more transportation hubs and logistics SEZs should be initiated as that will create common, shared facilities for logistics providers to bring about overall operational efficiencies. Indiaâ&#x20AC;&#x2122;s roads are congested and of poor quality. Its highways are also not accesscontrolled allowing humans, animals and all types of vehicles on the same road which results in accidents, reduces the eff iciency of highways and increases commuting time. Also, the amount of time spent in complying with inter-state and intra-state tax requirements and at transport checkpoints affects the cost and competitiveness of both logistics service providers as well as their customers. In this regard, Transport Corporation of India undertook a survey on various routes across India to study the operational efficiency of national highways. If we take an example of the Delhi-Bangalore route, it was found that the average speed of vehicles on this route was 20-21 kms per hour. On an average, there were 25 stops (15 toll collections) on the way and the average stoppage delay was five hours, about 5 percent of the journeyâ&#x20AC;&#x2122;s total time and on occasion, the delay was around 15-20 percent of the journey time. Due to all these reasons, trucks cover a maximum of 250-400 kms a day as compared to 700-800 kms in developed countries.

increase middle infrastructure The National Highway Authority of India is trying to keep its promise of adding 20 kms a day to the highway network in the country, but, in the process, it might end up compromising on the quality of construction. In order to improve the overall quality of freight transportation (both in terms of reducing transit times as well as reducing the number of accidents), the focus should be on high traff ic density routes by increasing their capacity and making them 100 percent access-controlled. More connecting roads like by-passes, ring roads etc. supplemented by middle infrastructure should be made to ensure faster entry and exit from

small towns and cities. The government should also introduce a uniform integrated tolling system where vehicles need to only slow down rather than completely stop and wait in queues for collection of toll at checkposts. Also, a system similar to the TIR Carnet system used in the European Union should be introduced that requires no checking of consignments at interstate checkposts since the consignments are sealed at the origin. This will facilitate smooth f low of highvalue, perishable and time-sensitive items.

shortage of manpower

NHAI IN tryINg to keep Its promIse of AddINg 20 kms A dAy mIgHt eNd up compromIsINg oN tHe quAlIty of coNstructIoN

Another concern is an acute shortage of skilled manpower in the logistics sector. The government should collaborate with academia and industry associations for sector-specific projects and tailor-made training programmes. Driver training institutes should also be set up to periodically train and update drivers on vehicle maintenance, road safety, hygiene standards and health hazards. The future of the industry is very bright and it is sure to witness exponential growth in the coming years, though the biggest challenge will be to increase efficiencies and become more cost effective in order to make Indian industry globally competitive. This is a problem which needs to be addressed in a holistic manner. Awareness at the state government level as to how a formidable middle level infrastructure regime can enhance overall economic eff iciency by simple solutions, like allocating 5-10 percent of space in any new industrial zone for logistics, can go a long way. Even at the central level, there are far too many ministries dealing with infrastructure. Possibly, the solution lies in forming a committee comprising senior off icials from different infrastructure related ministries who can create a roadmap for the development of middle infrastructure by taking state governments into conf idence.

Source: TCI- IIMC Joint Study report on Operational Efficiency of National Highways for Freight Transportation in India- 2009 INDIA |

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< feature

Not for the Meek

The logistics of oil and gas exploration and production (E&P) is both challenging and rewarding. Then why do we have so few players in the field? Jayashree Mendes explores the conundrum 46

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< feature

o other business activity in the world brings together so many companies, so much manpower and widespread use of technology as the oil and gas business does. Be it in onshore or offshore exploration, rig operations, or the areas of transportation, or retail, the oil and gas industry is more demanding and layered than any other industry. As per a guesstimate, even the smallest oil and gas exploration block involves a minimum cost outlay per day of ten lakh rupees and direct and indirect involvement of more than 6,000 workers. Leave alone the massive involvement of technology and the variety of the equipment involved, the logistics of the entire business is mind-boggling. Considering that India’s total production of crude oil during 2008-09 was 33.50 million metric tones (MMT) and the total production of natural gas during the same period was 32.85 billion cubic meters shows the huge capacity of the industry (Source: IBEF). Indeed, logistics plays a very crucial and integral role in India’s oil and gas business, especially in an upstream activity like exploration and

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production, not just when oil is discovered but far earlier even before the process of looking for the oil begins. Particularly offshore, managing the processes without the help of a logistics player is unimaginable. Overall, logistics in oil and gas is not just an appendage. It is a sub-contract.

Need for logistics Siddhartha Roy, the president of Arya Offshore – a company that was incorporated in Mumbai soon after oil was discovered at Bombay High in 1973, and has since grown to offer integrated logistics to the oil and gas sector – says, “It is generally thought that logistics companies offer peripheral services to their principals. But oil and gas companies have realized the importance of involving logistics players from the time they decide to bid for a particular field or block till production and sale.” Roy says that the biggest challenge for a logistics player is that of meeting the critical demands of companies conducting exploration offshore. “Even the minutest delay can cost millions of rupees per day. That’s why logistics service providers (LSPs)

playing in E&P offer holistic service. They are more proactive than restricting to being a pure logistics player.” Where do LSPs enter the equation? Looking for new oil-and-gas finds is a continuous process even though discoveries are rare. “Oil and gas exploration is a high risk game and a huge gamble. Companies and governments spend billions of rupees and nine times out of ten, one might not strike any oil at all. But it is critical to the country’s economic future. India imports about 70-75 percent of its crude requirements. In this light, local exploration for oil and gas is a persistent program, be it onshore or offshore,” says a consultant who wishes to remain anonymous. Exploration begins with incessant 2D and 3D seismic surveys conducted across land, oceans and seas. Large equipment move across land and sea for months and years using vibration, and reflection and refraction to find shallow and deep sea oil and gas. LSPs help the exploration companies acquire seismic data, in transporting seismic vessels, locating the seabed, processing and evaluation of data, while addressing the numerous

< feature

LSPs source equipment across the globe as an entire range of equipment may not be available with any one single company

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applications and engineering problems related to transportation, infrastructure, and tunneling. Once the seismic survey detects the presence of oil and gas, the government invites oil companies to bid for exploration now under its New Exploration and Licensing Policy (NELP). Bidding is a competitive process. However, there is a catch here. Seismic surveys only detect the presence of oil and gas and can be indicative. A successful bidder will be required to pump in up to Rs 30 lakh per day before the oil and gas can be extracted. For the technical part of the bid, an exploration company will have to be sure of the capabilities that its logistics partners bring to the table.

July 2010 | www.logisticsweek.com

In the fray Since they require large scale investments, companies bidding for E&P for a particular block come together in a consortium. The main bidder chooses its partners on technical skill-sets and their willingness to take a commercial stake. The consortium will rope in the LSP at this juncture. “An LSP on board at the outset understands the operational requirements of the job and places orders for equipment, especially the long lead items,” says KV Poojary, General Manager (Offshore Services), GAC Shipping, a logistics company in the oil and gas sector that recently ventured into offshore services. Long lead items are made-to-order equipment that require a lead time of two years or more for delivery. The exploration projects being

Big Players in the field n n n n n n n

Arya Offshore Babaji Shivram Chandra Logistics DHL GAC World Inchcape Sical Logistics

highly complex and tech-driven, equipment used are large and very expensive. There are few Indian companies that manufacture or own such equipment – a majority of them need to be hired. And the entire range of the required equipment may not be available with any one company. In terms of drilling rigs, some of the international companies that lease

them out are Transocean, Ensco, Diamond Offshore; while Indian companies are Aban, Jindal, Great Offshore, Great Ship. The large equipment are, in fact, ordered from various countries and hired as exploration projects run for a minimum of 5-7 years. Most of the hiring is done through LSPs. Regular equipment for offshore explorations include rigs, platforms, pipelines, SCADA (Supervisory Control and Data Acquisition) systems, control systems, pressure control metering stations, compression facilities, installation of GOSP (gas and oil separation plant), telecommunications, heavy lifts barge, storage tanks, power generation facilities, among other smaller apparatus. Gracias Thevar, Country Manager (Logistics), GAC Shipping,

LSPs aid oil and gas companies in acquiring seismic data, and in processing and evaluation of data

Highlights n India has significant oil and gas reserves and just over 60 per cent of the potential in the oil sector has been explored so far. n As per the Ministry of Petroleum, demand for oil and gas is likely to increase from 186.54 million tonnes of oil equivalent in 2009-10 to 233.58 mmtoe in 2011-12. n The production of natural gas went up to 47.57 billion cubic metres tonnes (BCM) in 2009-10 from 32.84 BCM in 2008-09. n India's natural gas demand is expected to nearly double to 320 million standard cubic meters per day by 2015 n Oil comprises about 33 per cent of India’s primary energy consumption at present

OIl and gas LSPs must know the proper etiquette of bringing in equipment into the country, getting documentations ready and returning them back to the owner after use

INDIA |

says, “There are real challenges and complications involved here. All the goods imported into the country for exploration must get the green signal from either the Ministry of Home Affairs or the Ministry of Defence or both. This goes even for oilfield workers.” But most importantly, according to Roy, LSPs needs to know the answers to the innumerable questions pertaining to equipment import. “What kind of goods (equipment) are July 2010 | www.logisticsweek.com

< feature

The process of oil exploration looks a lot like the example above. A company identifies an attractive area to drill, either onshore or offshore. Next, it and/or the government conduct seismic mapping to understand the presence of hydrocarbons. It considers several factors about drilling a well: How deep are the hydrocarbons? What are the rock formations beneath? How big might a potential hydrocarbon discovery be? Drill rig rentals are brought in and various equipment is set up after the presence of oil is detected.

What LSPs Do n Handling project transportation and supply chain

logistics n Acquire customs clearance for equipment and

manpower n Warehousing, packing, freight forwarding n Arrange clearances from Ministry of Home Affairs

and the Ministry of Defence n Maintain documentation of the innumerable

equipment required for exploration n Port and shipping services n Customs clearance for vessels bringing in cargo n n n n

and people Arrange air and helicopter transfer of people constantly flying in and out of oilfields Loading and discharging services Arrange for equipment, long lead items and anticipate project logistics once a block has been won Source and manage the skilled technicians for rig operations, barges, and supply vessels

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July 2010 | www.logisticsweek.com

they? Are they safe to import? Will they be allowed into the country? Are they restricted or non-restricted goods? Are those goods available in India? If so why should it be imported? Is there any customs duty to be paid? How long will the customs process take? Can there be any glitches? If the goods are stuck in customs, is there a back-up plan? Even if one gets it into the country, how do you take it offshore? Is there a supply base or a warehouse? And all these questions pertain only to the equipment. All this because it is imperative that equipment is not held up for days on end and is quickly transported.â&#x20AC;? The never ceasing documentation is another imperative. Since most of the equipment is leased, it has to be transported back to the owners which are often located overseas. The

Ministry of Defense will also want to know to what extent the equipment has been used, in case it needs to be imported in again for another project. Unless LSPs maintain complete records of import methods and payments, the equipment canâ&#x20AC;&#x2122;t be imported. However, the silver lining is that duties on equipment used in E&P are generally waived.

a matter of skills Then there is the question about manpower. This part of the project is outsourced to the LSP who arrange for skilled technicians to work at rigs, platforms and barges. Thousands of people work during various phases of an E&P project. And considering the grave security issues, this can become cumbersome. Customs clearances are mandatory and the

< feature terminologies: What Lies Beneath 3D seismic data: A set of numerous closely-spaced seismic lines that provide a high spatially sampled measure of subsurface reflectivity. 3D seismic data provide detailed information about fault distribution and subsurface structures. 4D seismic data: 3D seismic data acquired at different times over the same area to assess changes in a producing hydrocarbon reservoir with time. artificial lift: A system that adds energy to the fluid column in a wellbore to initiate and improve production from the well. Barrel pump: A small pump with an extended suction duct to pump fluid from barrels. Cable-tool drilling: A method of drilling whereby an impact tool, suspended in the well from a steel cable, is dropped repeatedly on the bottom of the hole to crush the rock. Centrifugal pump: A pump used in the handling and mixing of oilfield fluids. They operate in high-volume, low-outputpressure conditions. It is also known as a "C pump." Degasser: A device that removes air or gases (methane, H2S, CO2 and others) from drilling liquids. Derrick: A structure used to support the crown blocks and the drillstring of a drilling rig. Derricks offer a good strengthto-weight ratio. Drillpipe: The drillpipe connects the rig surface equipment with the bottomhole assembly and the bit, both to pump drilling fluid to the bit and to be able to raise, lower and rotate the bottomhole assembly and bit. Drillship: A maritime vessel modified to include a drilling rig and special station-

checklist, infinite. From scanning the backgrounds of the people hired to work to the number of workers needed and ensuring that they be allowed to enter the oilfields, the entire job has its own demands. Poojary says, â&#x20AC;&#x153;Nothing beats a visa problem. Most employees entering the country are not aware of the complexity of In-

INDIA |

keeping equipment. A drillship must stay relatively stationary on location in the water for extended periods of time. elevator: A hinged mechanism that may be closed around drillpipe or other drillstring components to facilitate lowering them into the wellbore or lifting them out. exploration: The initial phase in petroleum operations that includes generation of a prospect, and drilling of an exploration well. flare gas: An arrangement consisting of a vertical tower and burners used to burn combustible vapors. Gathering system: The process facilities that transport and control the flow of oil or gas from the wells to a main storage facility, processing plant or shipping point. A gathering system includes pumps, headers, separators, emulsion treaters, tanks, regulators, compressors, dehydrators, valves and associated equipment. Jackup rig: A self-contained combination drilling rig and floating barge, fitted with long support legs that can be raised or lowered. The jackup is towed onto location with the barge section floating on the water. Upon arrival at the location, the legs are jacked down onto the seafloor, preloaded to securely drive them into the seabottom, and then all three legs are jacked further down. Operator: The owner of the right to drill or produce a well, or the entity contractually charged with drilling of a test well and production of subsequent wells. Pipeline: A tube or system of tubes used for transporting crude oil and natural gas

dian laws. Some may have an employment visa, for instance, but forget the clearance of the Government of India. Handling men and equipment is a demanding job.â&#x20AC;? It may take a while for an LSP (as well as an oil and gas company) to get used to the complexity of exploration, what with the tedious docu-

July 2010 | www.logisticsweek.com

from the field or gathering system to the refinery. rig: A machine used to drill a wellbore. Onshore, the rig includes virtually everything except living quarters. Major components of the rig include the mud tanks, the mud pumps, the derrick or mast, the drawworks, the rotary table or topdrive, the drillstring, the power generation equipment and auxiliary equipment. Separator: A cylindrical or spherical vessel used to separate oil, gas and water from the total fluid stream produced by a well. Submersible drilling rig: A type of floating vessel supported on large pontoon-like structures submerged below the seasurface. Submersibles operate in relatively shallow water, since they rest on the seafloor. Suction pit: A mud tank, usually made of steel, connected to the intake of the main rig pumping system. Supply vessel: Any barge, boat or ship that brings materials and personnel to and from the rigsite. Surface casing: A large-diameter, low-pressure pipe string set in shallow formations. Surface casing protects fresh-water aquifers onshore and enables a diverter or a blowout preventer (BOP) to be attached to the top of the surface casing string after it is cemented in place. treater: A vessel used to treat oil-water emulsions so the oil can be accepted by the pipeline. Wellhead: The system of spools, valves and assorted adapters that provide pressure control of a production well.

mentation, people and permissions involved. An expert recounts an incident where a rig owner had to stop work due to want of a spare part. They called for one to be imported and installed. The technician promptly flew down from the US to India with the spare part. However, unbeknownst to the rig owner, the technician had

Oil and gas cargo ships are usually smaller than the average cargo ship or a cruise liner – oil and gas cargo ships range from 500 to 1,000 tonne with a draft requirement of 8 meters; cruise liners, for example, range between 15,000 and 20,000 tonne.

India's Annual Crude Production (in metric million tonnes)

12.2

2008-09

24.1

Preserve of the few

11.2

2007-08

22.9 11.3

2006-07

22.7 11.4

2005-06

20.8 11.6

2004-05

22.4 11.5

2003-04

21.9 11.8

2000-01 0.00

20.6 5.00

10.00

15.00

20.00 Onshore

25.00 Offshore

The annual crude oil production ratio of offshore to onshore operations has largely remained static. Source:Ministry of Petroleum and Natural Gas

overlooked some formalities, such as acquiring a clearance from the Ministry of Home Affairs to enter the offshore field and the work permit required in such cases. Consequently, the entire project schedule went haywire for a few days. Goods once having entered the country, prior to taking them offshore, need a place to be kept safe – either in a warehouse or in the port. Offshore transfer can happen only by sea or air. And huge equipment must go by sea. There is the question of berth and port availability. Generally most oil and gas companies use the concept of a shore base or a supply base. Most LSPs playing in the oil and gas sector have their own marine base inside the port. This is far different from the days when oil and gas companies set

up their own bases due to want of specialized LSPs. For example, Arya Offshore offers marine support bases on the east and west coasts of India. The company offers three types of marine support bases to its clients. Multiusers can use the water-front facilities at Bhavnagar and Mumbai with large storage and staging facilities. The Captive base offers similar facilities for a single operator. While Staging is a provision for material handling equipment, inventory management, and warehousing at site. While support services are offered, it still does not put an end to the berth or port congestion at Indian ports, which is a huge bottleneck. Port authorities give preference to liner or cargo ships on account of the latter fetching higher revenues. INDIA |

It is no surprise that just a handful of LSP players are present in this tricky and intractable area, and of that only two or three offer integrated service to oil and gas companies. “Oil and gas logistics is highly capital intensive, acutely technical and the LSP needs to provide end to end. It will not do to have the block owner running around to various players for various needs,” says Roy. In India, there are smattering number of large oil and gas LSPs (See box: Players in the field) and a handful smaller players limited to select parts of the supply chain. Technology obsolescence is a big challenge. A technology used today may be outdated in three months time. For example, interpretation of data acquired for seismic evaluation of oilfield requires technologically advanced software and equipment that are prone to obsolescence. So the LSP has to keep track of the technology to be used and order a fresh piece at the right time. “There is room for more technical players in this field. Most of the times we have to bring in technology solution providers from different countries due to the absence of local players,” says Gracias. Experts attribute the limited presence of LSPs in this field to the fact that the business is capital intensive, leaving little or no scope for small entrepreneurs. Even more, the gestation period could stretch to years, considering the highly mission-critical nature of the industry. Nonetheless, given the magnificence of the rewards, and the future of the industry in India, the oil and gas LSP business is a risk worth taking.

July 2010 | www.logisticsweek.com 55

< primer

Back to Basics In this section, we revisit some basic concepts – everyday logistics and supply-chain terms that need a brush up (or an update) every now and then

Andon

ndon is a manufacturing term derived from the Japanese term for a "Lamp" or signal with origins from ancient Japan where paper lanterns were used as flashlights or signaling devices. Andon lamps were originally developed as part of the Jidoka qualitycontrol method within the Toyota Production System together with Just-in-Time (JIT) to reduce process inventory costs in a supply chain. An Andon system is an essential aspect of lean visual control in a factory and in implementing a successful lean manufacturing program. Andon systems and Andon dis-

plays improve response time by support resources to plant operations that require attention. Andons can be used for multiple purposes - signaling resources, abnormal conditions, machine issues, and much more. Andon information boards provide an instant overview of a machine’s performance such as units completed and number of defects, according to the Factories Strategies Group. The boards can be in the form of computer screens, paper charts, electronic boards, manual boards, etc. They often include lights and/or sounds to communicate the status

Trailer Drop

railer drop is a safety risk that can occur at virtually any loading dock and is often more severe on trailers with air-ride suspension systems. When the container is being offloaded from the trailer on to the forklift, the trailer-bed can rise above the level of the forklift, and cause the container to come down with a heavy jerk at the operator’s end. This can not only damage the product and the forklift, but also cause back or neck injuries to the operator.

Source: OptimumFX

of a process and to call for help. On the Toyota Production Line, if an operator has a problem, the Andon cord is pulled to signal that help is needed. This lights up an indicator on the Andon board and starts playing a musical tone particular to the problem. The Andon board sometimes also indicates the type of help needed (maintenance, team leader, supplier, etc).

Will Call On the other hand, when the container is being loaded on to the trailer, the trailer level drops, causing the container to fall with a jerk on the trailer-bed, thus causing possible damage to the contained goods. The drop or the rise can range from four to eight inches during loading or unloading by a forklift. According to Rite Hite, a USbased loading-dock solutions company, trailer drops can cause severe back and neck injuries, as well as cause muscle fatigue to forklift operators. They can also cause product and equipment damage. For tackling trailer drop problems, vehicle restraints are now available. The restraint supports the rear of the trailer during the loading and unloading process minimizing vertical and horizontal trailer movement.

he term “Will Call”, in the wholesale and retail trade industry refers to merchandise that is to be picked up at the seller's place of business. A “will call” memo is given to wholesale delivery drivers as an instruction to pick up items at the address stated on the memo. This is done by customers to save on shipping charges and is often frowned upon by companies that are not designed for in-person sales. As a result, some companies ban the practice of will call pick-ups while others implement a will call charge for in-person pick ups.

Supplier Scorecard

upply chain improvement is critical for large, mid-sized and small sized manufacturers. The Supplier Scorecard is a tool that helps evaluate individual suppliers. The tool assesses suppliers based on performance benchmarks in areas such as Manufacturing Critical path Time (MCT), On-Time Delivery, Quality Parts per Million, Cost of Poor Quality, Inventory Turns and Productivity Gains. However, it makes room for adjustments depending on the specification of a particular industry.

Can you help us with more such terms – used everyday but seldom revisited? Please mail your suggestions to aanand@logisticsweek.com. If chosen, we will be happy to publish your suggestion with due credit. (Section concept: Rakesh Singh, Founding Dean, NMIMS School of Economics) 56

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July 2010 | www.logisticsweek.com

Logistics Media Prtner

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OFF THE SHELF

The Specialty Generalist

übner, in his book, “Strategic Supply Chain Management in Process Industries” discusses on how often practitioners in the process industry have to acclimatize their global production networks to changes in a challenging environment. Many of the supply network design models proposed by academia do not sufficiently capture the economic and technical questions that should be resolved. This book aims to provide the necessary operations research decision support tools. It does so by building on an example of the specialty chemicals industry, which faces a strong increase of competitive pressure and historically grown production networks that

typically lack a coherent design strategy. The author proposes process splitting of the planning process into two phases: global production network optimization and individual site selection. To support the first phase, a comprehensive Mixed-Integer Linear Programming model has been proposed and an Analytic Hierarchy Process approach has been suggested for the latter. strategic supply chain Management in process Industries By Reinhard Hübner Publisher: Springer Price: Rs 4,750

Towards a Sustainable Living

“K

ick the Fossil Fuel Habit, 10 Clean Technologies to Save Our World” is an attempt by an engineer, Cleantech authority, venture capitalist, pragmatic entrepreneur and philosopher and author Tom Rand, to enlighten us on ways to reduce our dependency on fossil fuels. Rand provides an in-depth look at 10 technologies that together can bring a clean future, free of fossil fuels. The book is a clarion call to governments, corporations and individuals to provide future generations the opportunity to live in a sustainable world.

The book advocates the use of alternate sources of energy such as solar, wind, hydropower and geothermal energy and how by adopting smart technology in one’s life one can take a step closer to preserving the environment. Rand uses anecdotes, combined with a hardheaded engineering and business perspective and vivid photographs to spread his message. Kick the Fossil Fuel habit By Tom Rand Publisher: Eco Ten Publishing, Inc. Price: Rs 1,570

Energetic Progress

he book “Transport Revolutions: Moving People and Freight Without Oil,”examines the kinds of change that motorized transport around the world could undergo. Today, 95 percent of this transport is fueled by derivatives of petroleum. A shortfall between demand and supply can cause prices to rise. According to the author, high oil prices, or even the anticipation of them, could bring about four kinds of transport revolution: 1. Internal combustion engines could be propelled by electric motors in the future. 2. Land transport carrying fuel on board could be replaced by electric vehicles that are

INDIA |

grid-connected. 3. Most marine transport is propelled by diesel engines. In future their use will continue but with assistance from wind. 4. Air movement is the fastest growing. However the author suspects that soon, there could be a decline in demand as there would be no adequate substitute for aviation fuels. transport Revolutions By Richard Gilbert and Anthony Perl Publisher: New Society Publishers Price: Rs 1,230

July 2010 | www.logisticsweek.com

< panoRaMa BLoGospheRe Forecasting ocean rates is a risky science Blogger: Laurie turnbull, supply chain consultant with the cole Group In his blog, Turnbull says that forecasting works well when parameters in consideration are certain. But what do you do when forecasting is based on variables or when the parameters lack clarity? When asked if there would be a surge in shipping rates in 2010, most shippers agreed a surge was expected or perhaps none at all. Only a fraction predicted a fall. The majority was right. 2009 and the previous year saw a drop in rates so it was only logical that rates go up or remain unchanged. Forecasting transportation costs doesn’t get easier in the face of economic uncertainty, it just gets more important. search tags: Laurie Turnbull, ocean rates

the more you train, the more you gain Blogger: claes Åkerlund, concept Manager, scania Driver training Åkerlund talks about the challenges of being a truck driver. Delivering cargo reliably through congested motorways, damaged forest roads can be stressful. Furthermore, drivers

By Puma After more than ten years of implementing its social and environmental standards (puma.safe), Puma launched its long-term sustainability program at the Design Museum in London. PUMA set new standards within the retail industry with its cutting-edge packaging and distribution system by renowned industrial designer Yves Béhar. The new solution will significantly reduce the amount of waste and CO2 emissions that traditional product packaging such as polyethylene bags generate and underpins PUMA’s target of reducing carbon, energy, water, and waste by 25 percent, and developing 50 percent of its international product collections in footwear, apparel and accessories according to best practice sustainability standards by 2015. Puma aims at a 25% reduction of CO2, energy, water and waste in PUMA offices, stores, warehouses and direct supplier

INDIA |

the Man, the Mouse and the Wardrobe Blogger: Farhad Manjoo, the new York times Farhad speaks about his experience with Trunk Club - an internet start up for men who dread a trip to a mall to buy clothes. Trunk Club is a clothing service based in Chicago that offers personal styling services. Under the leadership of Brain Spaly, a Stanford Business School graduate, Trunk Club has made it easy for men to buy clothes, hassle-free. The customer has an online consultation to take care of sizing after which the Club hand-selects outfits and ship them for free. The customer tries them out and receives a second opinion from an expert via a consultation. The item is sent back if it doesn't appeal to the customer. This is an example of how the internet will revolutionise retail. search tags: Farhad Manjoo, Trunk Club

Journals, Case Studies, Research Reports

ResouRce centeR PUMA.Safe Launches Sustainable Packaging

are expected to drive gently so as to save fuel, the tyres, etc. Surveys done by Scania show that drivers who underwent Scania driver training achieve at least 10 percent better fuel efficiency. Better drivers also help in longer tire life, lower maintenance, fuel costs, and lower emissions. search tags: Claes Akerlund, Scania, driver training

factories. The brand has also charted out a paperless office policy through a 75% reduction and offsetting initiatives for the remaining paper usage such as tree planting initiatives. Search tags: puma.safe, sustainable, packaging

Some 90 Percent of a Truck is Recycled By Volvo Volvo Trucks produced a dismantling manual back in the mid-1990s to facilitate recycling. Parts in good condition become spare parts, others are recycled or are turned into new energy. To make dismantling effective, the parts have been made easy to remove. In a newly produced Volvo FM or Volvo FH 4x2 tractor, 97 percent of the weight of the cast iron is recycled, as is 50 percent of the forged iron and 90 percent of the aluminum. When it comes to lead, bronze, copper and stainless steel, between 40 and 86 of the percentage by weight in a new truck is made from recycled material. Overall, about 33 percent of the weight of a new Volvo truck is accounted for by recycled metal.

July 2010 | www.logisticsweek.com

In Sweden, not a single truck component from Volvo Trucks is buried at a landfill. Search Tags: Volvo, truck recycle

PLAZA, the Logistics Park of Zaragoza By Noel Watson, Santiago Kraiselburd In 2000, the government of the Autonomous Community of Aragon, Spain, made public a project for the development of a large-scale logistics park on the outskirts of the city of Zaragoza. With an area of nearly 13 sq kms, Plaza (an acronym for Zaragoza Logistics Platform) would be by far the largest logistics park in Europe. The case illustrates the motivations, the reasoning used in deciding the location of the park, and also advantages (and disadvantages). It provides data to prepare an analysis from the viewpoint of a potential customer, where the cost advantage of locating a facility in Zaragoza with respect to Rotterdam can be quantified. Search Tags: Noel Watson, plaza, Zaragoza, hbr

g rMi er P aM P w M vav P ewa MiN Ner Por Te NTaiNaPaTN rT Ne PiPa g? gaT y TeroNTai TNaM T Ne Co iSHN ao Po PorTNdliN aTewa Nai C HNaPao Por Po kr rMug aMraal Ha dia g CHeN kriS Muga aMra Ma rT dHaTeri ed iNMiTed PorT T Mar rT dH Po PT M liMiTalS li Ndra a PorgHi PoN u Ndl T di present i you JN ivLOG.India Te rMiN and MLogisticsweek r a o M a C r i a PrCal Te PaTN abg kal Po a TuT toraPerformance Excellence’, a ik iP go Ha PorT a Si Sa‘Roadmap k k arad on Indian Ports. vi Mbai orHandbook T Mu CHi P PorT P ko ldia Ha 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:

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New Products, Technologies, Solutions

scania Launches new V8 Lineup

weden based commercial vehicle manufacturer Scania has launched its V8 series with the highest torque and power ratings of any truck engine: 3,500 Nm and 730 hp. The V8 is based on the Scania R-series, boasting high-output and with four power ratings to choose from – 500, 560, 620 and 730 hp. Its engine is based on the modular engine platform and technologies used with Scania's new inline engines, while also sharing many features and components of existing V8s and a great deal of the architecture with other Euro 5 V8s. The truck also has an all-new common-rail fuel injection engine platform. The V8 features a reinforced Scania gearbox which is fitted as standard with the new Scania Opticruise automated gear changing system. The new engine is tuned to give plenty of torque at idling speed; maximum torque is produced from 1,000 r/min.

hyundai Develops eco-friendly Marine Gas engine

yundai Heavy Industries (HHI) has completed a test run of its new, ecofriendly HiMSEN Gas Engine H35G. The new gas engine can be used for ship propulsion and power plants. The engine features ‘Lean Burn’ technology and is ecofriendly and highly efficient as a result of reduction of parts to make it lighter and therefore fuel saving. The new engine emits 20 percent less CO2

INDIA |

than diesel engines, reduces NOx emissions by 97 percent to reach a claimed "world’s lowest" level of 50ppm, and improves engine performance by 47 percent. Upon the completion of the newly developed gas engine, HHI will have full production capacity of 582kW to 10,142kW diesel and gas engines. HHI plans to start full-scale production of the new engines early next year.

July 2010 | www.logisticsweek.com

cLeVeL Launches cstReaM

LEVEL, the company that introduced the term ‘carbon footprint’ in early 2000, has launched its f irst web application to simplify carbon management in the supply chain. The carbon app – CSTREAM – makes it easier and cheaper for any organization to work out the carbon footprint of its supply chain and also to collaborate on carbon reduction. CLEVEL developed its bespoke cloud based approach on client requests and is now offering CSTREAM as a carbon app that can be individually branded and tailored to match the needs of new clients.

< panoRaMa New Products, Technologies, Solutions

easyJet unveils ash Detector

asyJet, the UK’s largest airline, has unveiled a technology that will minimize future disruption from volcanic activity. EasyJet will be the world’s first airline to trial a new technology called AVOID (Airborne Volcanic Object Identifier and Detector). The system, a weather radar for ash, was created by Dr Fred Prata of the Norwegian Institute for Air Research (NILU). AVOID involves placing infrared technology onto an aircraft to supply images to both the pilots and an airline’s flight control center. The images will enable pilots to see an ash cloud up to 100 km ahead of the aircraft and at altitudes between 5,000ft and 50,000ft. This will allow pilots to make adjustments to the plane’s flight path to avoid any ash cloud. On the ground, information from aircraft with AVOID technology would be used to build an accurate image of the volcanic ash cloud using real time data.

Gramin Launches nüvi 3790t

ramin, a manufacturer of satellite navigation devices, has released its newest variant in the 37xx series, the nüvi 3790T. A personal navigation device (PND), it features a multi-touch glass display, nüRoute technology with trafficTrends and myTrends, voice-activated navigation, 3-D building and terrain view, lane assist with junction view, hands-free calling compatibility, and subscription-free traffic alerts. The nüvi 3790T is less than 9 mm thick and has a full glass 4.3” diagonal multi-touch display. Dual orientation capabilities allow you to use the nüvi 3790T horizontally or vertically. Implemented with trafficTrends, the nüvi 3790T automatically learns daytime trends for traffic flow to improve routes and better predict estimated time of arrival based on time of day and day of week. For hands-free calling, it integrates Bluetooth with a built-in microphone and speaker that can be paired to a Bluetooth-enabled device. The device also has another feature, ecoRoute, that calculates a more fuel-efficient route, tracks fuel usage, among other things.

INDIA |

July 2010 | www.logisticsweek.com

con-Way Introduces twitter app to Match Freight and carriers

on-way Multimodal, a division of Con-way Inc., has launched a twitter app, Con-way TweetLoad — a tool that helps carriers find freight loads leveraging Twitter. Carriers can now easily access available loads from Con-way Multimodal by following TweetLoad on Twitter at www.twitter.com/ConwayTweetLoad. Carriers following @ConwayTweetLoad can quickly see the latest available shipments, along with links to further information on the Conway Multimodal link board where the carriers can place bids on available loads daily. To create the TweetLoad functionality, Conway Multimodal IT professionals have designed a patent-pending application that extracts key information on available loads from the company’s load board, LINK, and uses it to populate individual load tweets viewable by TweetLoad followers. The application checks and transmits new loads every 15 minutes to keep information up-to-date for carriers following it.

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Jul y 2010 July 14-16, 2010 Future Supply Chain StrategieS the golden palms hotel & Spa, Bengaluru Frost & Sullivan’s Transportation and Logistics Practice is hosting an exclusive strategy workshop for the logistics sector ‘Future Supply Chain Strategies’ from 14th-16th July 2010, at the Golden Palms Hotel & Spa, Bengaluru, India. Frost & Sullivan finds that the total logistics market in India earned revenues of $75 billion in 2009, representing about 6.2 percent of the country’s GDP. The market is expected to reach $120 billion by 2014, witnessing a CAGR of 9.9 percent between 2009 and 2014. The transportation segment accounts for about 62 percent of the total market reiterating the fact that it is the most important logistics function for all industries. However, Indian logistics service providers (LSPs) fail to satisfactorily meet end-user expectations with regard to key performance criteria such as process improvement capabilities, and material safety. The workshop intends to assemble a network of visionaries and thought leaders from industry sectors such as automotive, IT hardware and telecom equipment, retail, and pharmaceuticals in India, for the specific purpose of developing future supply chain strategies. Frost & Sullivan will facilitate the ideation and evaluation among the participants of the best possible methods and practices through workshops, breakout sessions, and panel discussions to develop practical, feasible, and sustainable supply chain models essential for organizations. Eminent speakers and panelists will discuss and explore topics providing insights into the current status of the logistics industry, structural and regulatory developments, capabilities, and bottle necks. Expert groups will work to create an ideal future supply chain model and discuss strategies for their assigned industries. Log.India is one of the media partners for the event. Organized by:Frost & Sullivan Tel: +91-44-4204 4500 Ext 491 July 14-15, 2010 auto SCM 2010 hotel le royal Meredien, Chennai The automotive sector in India has been booming and has emerged into a competitive market with a host of local and global players. OEMs and suppliers have been developing and executing competitive strategies to get an advantage in the market place. Automotive supply chains are a critical source of achieving this competitive advantage. The CII Auto SCM 2010 event throws spotlight

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on the current state of auto logistics, needs, issues, strategy, process and organizational imperatives of this sector both at the company as well as country level. India’s aviation sector is also showing signs of a strong uptick. The sector has grown by 25 percent in the last five years. India, along with China and West Asia, is going to be a major driver of the aircraft, maintenance and overhaul (MRO) market – a critical segment of aviation logistics industry. The conference would be organized as an interactive workshop over a 2-day period. Organized by: CII Institute of Logistics Email: bhanumathi.k@cii.in July 29, 2010 energizing the FinanCial Supply Chain hotel Sahara Star, Mumbai The banking and financial world, in association with Institute of Supply Chain Management (ISCM) is organizing a one day seminar on Energizing the Financial Supply Chain. The seminar will include: Optimizing the financial supply chain; Factoring and forfeiting; Collections management; Developments in trade finance; Role of SWIFT in financial supply chain; and Risks in financial supply chain. Organized by: Associated Business Media 23 - 26 July, 2010 inDiaMart aMteX 2010 ( aSian MaChine tool eXhiBition ) pragati Maidan, new Delhi, india Indiamart Amtex 2010 (Asian Machine Tool Exhibition) Delhi, will serve as a medium and base for showcasing technological development realized by several machine tools and auto component industries. It stands out as the largest trade event of manufacturing technologies, machineries and machine tools in Asia. The tradeshow has seen a significant growth of 300 percent during this time and with more than 1,200 stalls displaying the most innovative inventions, it will be a medium for exchanging interaction amongst manufacturers, suppliers and users of the emergent Indian market. Indiamart Amtex-2010 will have visitors coming from a wide array of industries such as; public authorities and institutions, manufacturing industry, capital goods industry, basic materials primary products, services, distributive trades, consumer goods industry, telecommunications, construction industry, energy industry and other manufacturing sectors. It will provide a one-stop platform for integrated technologies Organised by: Triune Exhibitors Private Limited Tel: +(91)-(80)-43307474/22352770/22352771

July 2010 | www.logisticsweek.com

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